Top 5 Things to Teach Your Kids About Credit Cards

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Americans are simply inundated with credit card debt. We are a country in the
red, starting from the federal government on down, and it’s no surprise we’re in the
financial mess we currently find ourselves. Although we could spend all day wagging
our fingers at the government and our trillion dollar deficit, the truth is it’s up to us
parents to show our children the way. Credit should be a resource, a way to qualify
for major life purchases such as cars and houses, and a fall back in unexpected
emergency situations. The problem is, most people don’t use their cards this way. Kids
are impressionable, and they look to us to show them the proper approach to life. But
parents are also battling advertising, and billion dollar corporations that make their
money on ill-prepared young adults getting in over their heads. If you want to help them
avoid the pitfalls of debt, here are the top five things to teach your kids about credit
cards.

First and foremost, a free t-shirt isn’t a good reason to take on a credit card.
Although the Credit Card Act of 2009 made it much more difficult for card companies
to profile young adults and push them into picking up a card with free giveaways and
spring break contests, that doesn’t mean they aren’t finding other ways to target our
children. Our kids watch us flashing the plastic when making purchases, and they want
that very adult experience. But you have to teach your child to look at the real financial
benefits and detriments of every us bank credit card offer, and not to pick one up because of some free
enticements.

You also must explain how building credit works. A good credit score takes you far
in life. It allows you to buy a car when you need one, and qualify for a mortgage at a
reasonable rate. And it doesn’t happen by accident. Teach your kids how credit is built,
through consistent purchases paid off in full each month. And be very clear about the
consequences and limitations they’ll face if they ruin their credit score. Credit ratings
are built over years of wise decision-making, but can be destroyed over just a couple of
months if they’re not careful.

Kids must also be taught about the fine print. Credit card offers vary wildly, but the
differences aren’t always obvious. Sure, monthly interest rates and spending power
are the keys, but they can’t forget about fees, penalties and the privacy notice. The first
time your child gets a credit card offer in the mail, go over it with him. Point out the small
details that could go forgotten, and go into specifics on the consequences of missing
payments. They need to understand that real money is being exchanged every time they
swipe that plastic, and it all comes with a very real impact. And card companies don’t
particularly care if you understand them fully or not.

Next, talk to your kids about the companies behind the credit cards. Not all banks
and lending organizations are the same, and in this day and age it is important for all of
us to be conscious consumers. Companies have social and political agendas, and use
their financial might to move those agendas further. The only power consumers have is
voting with their dollars, so it is up to each one of us to understand the companies we
give our business to, and to only support companies that we can believe in.

Finally, teach your kids about the secondary benefits of credit cards, and how
to best take advantage. Most savvy cardholders apply for cards that have points
or bonus programs, or even cash back on purchases. Those programs make a

difference, as regular consumers can earn free flights and gifts, or even put some
money back in their pockets each month. The smart shopper will pick a card according to the benefits it gives as well as the interest rate, and
your children should be prepared to think about a credit card in that manner before they
start applying for their own.