BOSTON (CBS) – Credit cards can be a problem no matter what age you are. Combine that with being a kid and it spells out disaster.

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. But kids are still getting the hard sell and the focus is on getting mom and dad to co-sign.

Seventy-six percent of undergraduates hold at least one credit card and half have at least four cards and most maintain a balance thus incurring finance charges each month. The average credit card debt carried by undergraduate college students is over $3,000.

And for 70% of graduating seniors they leave with a degree and almost $30,000 in student loan debt. Add in the credit card debt and you have a kid on the brink of financial disaster at graduation.

So just like the sex lecture you need to sit your kids down and talk to them about credit 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
  • The credit card company may charge an annual fee for your card
  • The credit card companies makes money by charging the retailer 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 and can increase the interest rate
  • Paying only the minimum each month can drag payments out for many years
  • 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.
  • Credit History is important. You can get a free credit history annually at annualcreditreport.com
  • Credit scores are important. myfico.com has lots of good information along with www.bankrate.com
  • Debit cards may be a 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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