Kids & Cash: Credit Cards
BOSTON (CBS) - I want to talk about the big kids today, those in high school and going off to college in the fall.
Credit card companies can no longer easily sign a kid up for a credit card. If the student is under 21 they will need someone to co-sign the card or prove they have an income stream to pay their bills.
College kids are using a variety of methods to pay for their purchases at school. Debit cards are popular, cash works, prepaid credit cards and their parents' credit cards.
Many parents are making their kid an authorized user on their credit cards. Parents feel they have some control because they see the bills each month.
It is becoming a cashless society so our kids need to learn about credit. So just like the alcohol lecture you need to sit your kids down and talk to them about money before they leave this fall for college.
Here are some of the basics to cover:
- Credit is not "free" money and it must be paid back
- Many credit card company charge an annual fee for the card
- The credit card company makes money by charging the retailers a fee to participate
- The credit card company charges interest if the balance is not paid in full each month
- The credit card company charges a fee if the payment is late & can increase the interest rate
- Paying only the minimum each month can drag payments out for many years
- Check your credit report. You can get a free credit report annually at annualcreditreport.com
- Credit scores are important. myfico.com has lots of good information.
- A bad credit report will follow you. A potential landlord or employer and insurance companies as well as lenders have access to your credit report. Poor credit can mess up renting a place, getting a new job as well as costing a higher car insurance rate.
- Debit cards and pre-paid credit cards are good training card for teens; they can only spend what's in the account and no more!
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You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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