Credit Card for Child. 7 Things to Tell Your Children About Credit Cards. Talking with your children about credit card is as essential as teaching them how to drive a car, being responsible for their work and doing their homework.
What your children learn about credit cards today will affect their decisions in the future with their own cards and with their money. Even if you don’t believe in borrowing yourself, it is important to teach your children its benefits and disadvantages.
Credit can be a complicated issue, but the basic factors can be easily explained to your children.
- Credit cards are not bad
The main lesson about credit cards is that this is a debt that represents a loan. It must be paid as soon as possible to avoid interest charges. But, cards used responsibly are not bad. These help you make your credit history. While you spend and make your payments on time your credit identity is established and developed. This gives you the opportunity to get a good credit rating and then get a bank loan or a mortgage. All this in the end contributes to your assets increase, depending on how you manage your credit.
- Debts are not free – Talk to your children about the interest rate
Credit cards are very practical when shopping. But, if the full amount is not paid on the due date, you will have to pay interest charges. The interest rate is generally high for cards. The average cup in the US is around 16%, with an average debt around $ 5,000. Depending on how much you pay each month, your interest payments can be very high.
- Credit rating is very important. These are like grades in school.
The credit score indicates how you handle your debts. The higher this rating, the better. Negative activities impair your rating. These include; late payments, do not pay and use a lot of credit. While if you keep your debts under the authorized and make your payments on time your rating increases. Only use credit cards if you can pay your debts on time.
- Don’t let your friends, television or social networks influence your spending decisions.
Temptations and influences for you to consume are everywhere. Do not be influenced by friends and social networks, since you must pay your debts yourself. By not complying with your payments, you will be harmed. Your credit errors remain in your history for a long time.
- Credit cards, if you use them properly, can open the doors to better opportunities.
If you build a good credit using the cards and have a good score you will have opportunities to obtain other types of debts. Student loans, mortgages and personal loans are some of these. Through these credit opportunities you can build a financial heritage, buying real estate and using loans to open a business.
- Talk about the differences between a debit card and a credit card
Maybe your child saw you use a debit card. Explain that this is different from a credit card. The debit card uses your deposited money to pay for your purchases. This is like paying in cash. The credit card is a loan that you must pay.
- Seek help if you feel overwhelmed by debt.
It is important to tell your children that if they have too many debts and feel overwhelmed or stressed, they can seek help. Debt consolidation and credit counseling programs can be a solution. With these it is important to avoid scams and only use approved programs. The government offers help to deal with debts on the consumer page.