Credit Cards

Learn the pros and cons of using a credit card

Better Business Bureau recommends parents help their teenagers and college students understand money management, as well as the impact of using their first credit cards.

Plastic payment methods have been around for decades, and young people quickly gravitate away from cash and towards debit and credit cards for entertainment, purchasing supplies and online purchases.  

Aside from convenience, it is essential for young people to have first-hand experience managing their finances. If they are not prepared and responsible, they can lower their credit score.

Our credit score follows us throughout our lives and determines whether we will be able to obtain credit, how much credit and its interest rate. Since our credit score is based on our credit reports, it is crucial that consumers avoid fees for late or missed payments and bank account overdrafts.

Young people’s store of choice is the internet, and that requires a credit card, a debit card or an online payment system such as PayPal, which is tied to either a bank account or card.

When plastic is used instead of cash, spending can easily surpass the ability to cover bills. Credit card interest charges accumulate when a balance is carried over from one month to the next. Overspending with a debit card carries its own expense in the form of overdraft fees, which add to a debt load.

If a credit card holder is responsible and pays off monthly balances, it is an excellent choice because of the protection it offers in the event of fraud or loss. Debit cards do not have the same level of protection.

One way to avoid interest charges and overdraft fees is to use a preloaded debit card, which can be refreshed at a bank, online or through direct deposit.  

Preloaded debit cards charge fees for activation, monthly service, and ATM withdrawals. Shop around to find a card with the most favorable fee schedule.

BBB’s tips for new cardholders include:

Monitor Credit Reports

Visit to check their credit report. The service is free and not conditional upon purchasing any other services. Identity thieves are known to obtain Social Security Numbers not only from teenagers but also children. In some cases, victims won’t know until the first time they check their credit report or apply for credit.

Start Slowly

By the time teenagers hit 18 years old, they should begin building a credit history. The key to responsible use of a credit card is paying off balances to demonstrate to potential lenders an individual’s ability to manage their finances responsibly, indicating they are a suitable credit risk.

Monitor Records

Keep a close watch on receipts and statements. That is how cardholders can determine if an unusual charge is a mistake, unauthorized or the result of fraud. This is especially important for online transactions.

Keep Info Handy

Make sure to keep the bank’s and card issuer’s customer service numbers handy to let them know as soon as possible if there are suspect charges or if a card is lost or stolen. This is especially important when a debit card is linked to a bank account.

Fayette Woman

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July 6, 2018