Getting your own credit card is one of many thrills of entering the age of adulthood. That’s when you turn 18 years of age in some states and 21 years in others. Having a credit card increases your purchasing power and gives you the opportunity to building your credit score. Yet, using your credit card irresponsibly can land you in trouble. You will accumulate unmanageable credit card debt and damage your credit history.
Credit card education for young adults is the key to learning how to build a solid financial foundation.
What Does Credit Card Education for Young Adults Entail?
Credit card education helps build strong financial habits for first-time card users. It essentially covers five important lessons:
#1. How credit cards work
#2. How to choose the right credit card
#3. How to use a credit card to build good credit
#4. The difference between minimum payments and full payments
#5. Mistakes to avoid when using a credit card
Importance of Credit Card Education for Young Adults
Credit cards make it all too easy to overspend without any accountability. This can be easy for first-time users to splurge without understanding the consequences. Most young adults do not comprehend the implications of credit card debt and how difficult it can be to reverse. Many ignore the problem, hoping it will resolve itself but it doesn’t. In fact, the interest keeps adding up, pushing them further and further into debt.
Aside from credit card debt, late payment or non-payment of bills stays on the user’s credit report for 7 years. Every late payment also removes a few points off the credit score. This makes it more difficult to get a low-cost line of credit later on.
Educating young adults on the basic use of credit cards can help them avoid these pitfalls. Before your teen gets their own credit card, make sure to have a discussion covering the five points mentioned above.