Credit Card Facts for Teenagers

August 05, 2014

Every year as Michigan teenagers graduate and get jobs or leave home for college they usually credit cardsdiscover credit cards…and can get into big trouble. Parents need to teach their teens the benefits-and dangers-of credit cards. This is very important because in most states 18 year olds do not need parental consent to apply for credit cards. Parents may not teach them and teens often lack a basic understanding of budgeting, saving, credit management and debt. Here are some tips from the National Foundation for Consumer Credit:

  • Amazingly, young people many not realize that credit card purchases are not free.
    Don’t let them think they will never have to pay. A credit card purchase is a short-term loan.
  • Credit agencies keep score. Teens are “graded” on how quickly they pay their pay their debts. A bad credit report can follow the child for many years and make it difficult for them to qualify for a student, auto or home loan.
  • There are cheaper ways to get a free T-shirt or Frisbee then to sign up for a credit card with a $25 annual fee, high interest rate and short grace period.
  • Carrying a credit card balance is costly. Let your teen know that once the grace period ends, he or she will be assessed interest. For example, if your teenager charged $1,000 on a card with an APR of 17% and made only the minimum payment of $25 (2.5%), he or she could end up paying almost another $1,000 in interest! This is no bargain.
  • Credit cards are not all the same. We all must shop for the best annual percentage rate (APR), grace period, spending limit and other terms.
  • Credit cards are helpful in emergencies. Unplanned expenses like car repairs happen; but when possible the teen should pay off their balances in full to improve their chances of being approved for future credit. One rule of thumb; try not to charge anything that can’t be paid off in 90 days.
  • If they get into trouble, credit counseling is available. Encourage your teenager to come to you with questions. One sources for information and help is a Consumer Credit Counseling Service office that can be found at

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