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5 Credit Card Tips to Teach Your Kids

It is important to teach your kids at an early age the importance of money and finance. This will help them to be more aware of the workings of money, banks, credit cards and their spending habits and it will also increase their chances of not needing debt consolidation in the future. An important lesson to teach your kids is the dangers of credit cards. Credit card debt plays a large part in people needing debt consolidation and filing for bankruptcy. Therefore a good lesson on credit card responsibility will benefit well throughout their adult years.

The first tip you should teach your kids about credit cards is their purpose. You should make it known that they shouldn’t just use them for anything they want. A tip to give them is to let them know that if they plan on purchasing something using their credit card it should be for an amount that they will be able to pay back within a couple of weeks. However, the best advice you can give is that if they can’t pay cash for it they can’t afford it and therefore shouldn’t purchase it. Credit cards should, in all actuality, only be used for emergencies. This tip is certain to keep them from needing debt consolidation in the future.

The second tip you should teach your kids about credit cards is the interest rate charge. They should know that they will not only have to pay the credit card company the amount of the item they purchased but an added fee that the credit card company will charge them for allowing them to use the credit card. You should make them well aware of interest rates and how they increase the cost of the item purchased and continues to do so until the balance on the credit card is paid off.

The third tip you should teach your kids about credit cards is the unfortunate late fee and over the limit fees. Your kids must understand that they will have to pay a monthly amount to the credit card company for the things they purchase with their credit card. If this payment is made late thee will be a late fee charge to their account for the late payment. Therefore, they will not only be paying the amount of the item they charged and the interest rate of the credit card but they will also be paying a late fee on top of that. All of these charges can make that one item they purchased on their credit card very costly.

The fourth tip you should teach your kids about credit cards are the disadvantage of using the credit card altogether. You should draw up a diagram showing your kids how much the one item they purchased with the credit card will actually cost them. For example, the store may have charged them $50.00 for a pair of jeans. However, the credit card company will charge them a 10% interest rate or $5.00 to use the credit card. This means the jeans have now cost them $55.00. And in the unfortunate event they miss their payment the credit card company will charge them a $10.00 late fee. This now makes the cost of the jeans $65.00. Visually showing your kids the disadvantages of using credit cards outside of emergencies will detour them from using the credit cards for frivolous purchases.

The fifth tip you should teach your kids about credit cards is that they are using real money. Just because they may use the card to purchase items and not have to spend any money at the time doesn’t mean they will not have to pay back the amount they used the credit card for. Teaching your kids to be financially responsible and to stand up to their financial responsibilities will keep them from messing up their creditworthiness and needing debt consolidation in the future.