Who do you think is more likely to get into trouble using credit cards? A college freshman who was never exposed to credit his entire life, or a teenager who was added as an authorized user on his parent's card at 15 and taught how to responsibly use credit. Let's put it this way. I've met a lot of people who have found themselves in serious debt, and every single one of them started using credit for the first time when they were older or in college. Not once have I ever met a young teenager in credit card debt. Have you?
So here's my point. While many personal finance experts shun the idea of credit cards in teenagers' wallets, I happen to believe there's really no better time for a young person to build sound financial habits and learn how credit works. If you're a parent who cares about your child's financial future, I hope you're doing what's necessary to help your teen learn how to use credit cards responsibly at a young age. And if you're a teenager who unfortunately doesn't have parents willing or able to get you started on the path to good credit, here are 5 quick tips to keep in mind as you begin the process on your own:
1.) Become an Authorized User
Becoming an authorized user on a credit card in good standing with low credit utilization is the best way to build credit from a young age. Check with your parents, siblings, aunts and uncles, and find someone you can trust to add you as an authorized user as soon as possible. Length of credit history accounts for 15 percent of your FICO score, so becoming an authorized user early on will give you a huge advantage over your peers. 2.) Practice with a Debit Card If you can't get approved for your own credit card or become an authorized user, at least get yourself a checking account so you can start using a debit card. While debit cards are certainly different than credit cards, managing a debit card should help teach you how to budget and keep track of your expenses. You'll need to use these same skills when you're old enough to have your own credit card.
2.) Treat Credit Cards Like Cash
One valuable lesson to learn at a young age is that cash and credit must be treated in the same manner. What I mean by that is you should never purchase something on a credit card if you don't already have the cash sitting in your bank account. Credit cards are a convenience and a tool to manage your finances. They should never be used as a way to buy something now and pay it off over an extended period of time.
3.) Strike the Word "Minimum Payments" from Your Vocabulary
Responsible credit card use means paying your bill in full every month. You should never carry a balance or ever think about paying anything less than the statement balance. EVER! 5.) Compare and Apply for Credit Cards Online Credit card offers will start arriving in your mailbox at some point in the future. Don't get overly excited. This doesn't mean you're now part of some exclusive club. In fact, there's a good chance you'll find a better credit card offer online. So do your research, compare the best credit cards for college students or 0% interest credit cards online and find the perfect card that fits your lifestyle.