Teenagers And Credit Cards
Ana at DebtFree-Revolution wrote about teenagers and credit cards last week. The post really struck a chord with me. In the post Ana discussed a readers email about a credit card offer mailed to her daughter that was targeted to High School Seniors. Well, that is really no shock to me. I was once one of them, although I was a SOPHOMORE in High School at the time.
I was 16 when I got my first credit card. Yup, 16. I was on top of the world. I had a part time job and made good money for 16-$400 a month; I had a car, a checking account, savings account, and a brand new visa with a $350 limit. I was a super star.Was I irresponsible with my money or that credit card then? No way. It was made VERY clear to me that one financial foul up and all privileges were gone. No excuses.My parents really put the fear in me and I paid that credit card off entirely each month, I put 10% of my paychecks into savings and bought all my own “stuff” clothes, gas(although it took only about 8 dollars to fill it up for the week back then) and all the little things I “needed” in life. I was very responsible and you can imagine how proud my parents were.
Fast forward two years. I’m off to college 2,000 miles from home. How did those nice folks at visa congratulate me on my newly found “adulthood”? They increased my credit limit to $1,200. Sweet. So, out of home sickness, loneliness and maybe boredom- I shopped. I shopped and shopped until I had nearly maxed that Visa out and was beginning to wonder how I would make the minimum payments.I remember being panic stricken at the thought of calling my parents. Not to worry, without my asking, Visa bumped my credit line up to $3,000. Yes, $3,000 for an 18 year old.
Well, that made the payments seem so much more reasonable to me, so I made a plan. I would pay the minimums every month until it was paid off. (Can that actually even happen?) Then, I would pretend like the whole thing never happened.Every time I spoke to my Mom, I would have all the right answers “Everything is good, I’m happy” “Yes, I put 10% in savings each paycheck” “Yes I pay all my bills on time”. Oh, the horror. I lied to my own Mom just about every time I spoke to her.
The truth is, even though my parents had tried so hard to teach me to be responsible with my money and that Visa, it didn’t quite work. They had put a fear in me of all the “bad” that would happen if I messed up financially and they taught me how to manage my money, but they didn’t teach me how to handle my emotional relationship to money.
Even though I knew better, my emotional spending started again. Out of loneliness, sadness, home sickness, whatever it was…I spent and spent and spent. Within 6 months of leaving home I was 18 years old and $3,000 in debt. I couldn’t manage the payments, I needed help. I was too afraid to ask, the stress led to more emotional spending and I drained my meager “life” savings. The late fees and overdrafts starting piling up, Visa was calling and it all came crashing down.
I called my Mom, and I will never forget the disappointment in her voice. Not just because of my screw up, but because I was afraid to ask for help. Thankfully, my wonderful Mom (Hi Mom, I love you!) agreed to pay the bills if I agreed to close the Visa account and cut up the card. Done. She didn’t have to ask me twice. I was ready to feel that pressure lifted. Then, a funny thing happened, 6 weeks after the Visa “issue” was cleared up…what should show up in my mailbox? A brand new, ready to activate, never asked for it-Mastercard with a $1,500 limit. I was smart enough to cut that one up without stopping to think.
Now, I am older(I’m telling by how much!) and (hopefully) wiser and still don’t understand why I was given so high a credit limit at such a young and naive age. Do I think I should have had any credit card in the first place? Yes and No. I think if the credit line had remained at the original credit line of $350 I would have been able to manage the balance and budget for payments. I also think I would have learned a lot more about credit through the experience had the limit not been increased. I don’t think that any 18 year old should ever be handed $3,000 in credit with the exception of student loans and the like. The temptation is just too high and the credit card companies know this-they assume (often correctly) that Mommy and Daddy will always be there to bail the kids out.
I think credit, debt, finance and money management should be a top priority for parents and educators of teens. Possible with the right knowledge and skills in finance High School and College kids will make wiser choices with their money. Then again, I had parents that taught me well; taught me the ins and outs of finance-the good, the bad and everything in between and I still made all the mistakes Visa wanted me to.
What do you think? Do teenagers need credit cards? Is it genius or unethical (or both) for credit card companies to target teens?
Topics: Finance & Money |
March 31st, 2008
Actually, Visa gave you such a high limit because they were banking on you doing exactly what you did. They give credit cards to college kids because they know that the majority of those kids are going to max out the cards, get in over their heads (sometimes with 4 or 5 cards!) and call Mommy and Daddy to bail them out.
You were lucky enough to have parents who gave you a good foundation. Most kids don’t get that. Credit card companies know this and that’s why they have 15 tables set up on every college campus at the beginning of every semester.
March 31st, 2008
I have mixed feelings about whether teens need credit cards because there are always “exceptions to the rule,” but for the most part, I say no. I know for a fact that I didn’t need one. I’m 24 now…been out of college for 3 years…still trying to pay off that dumb ole’ debt I charged up.
And guess what, my husband and I now have one credit card between the two of us just for emergency situations. It doesn’t even leave the house half the time when I go shopping.
March 31st, 2008
I have strong feelings on this subject. No, I do not think teenagers need a credit card. One of the biggest mistakes I see parents make is giving a teenager a credit card to “help them build credit.” Why? So they can finance a new car, or a big mortgage when they get out of school? I would much rather see parents encourage kids to pay cash, save for their purchases, and not buy into the “FICO is our master” way of thinking.
March 31st, 2008
I also have strong feelings: it is easier for a teen to get a credit card than a driver’s license. At least we make sure they know how to operate a car before we allow them to get a license!
You did the exact thing Visa wanted you to do. So did I. The difference is my parents never bailed me out, nor did they try to instill the idea of not carrying a balance (my mom still carries a balance I think).
March 31st, 2008
DFR- It may be a good thing your parents didn’t bail you out-sometimes learning things the hard way is the best way! I think, sometimes figuring these situations out on your own can make the lessons stick with you!
March 31st, 2008
Frugal Dad- Agreed…FICO is not out master-I think everyone needs good credit standing, but that can be reached without credit cards-having checking/savings/investments and paying regularly the “normal” bills like utilities and cable can have just as good an impact as loans and credit cards for a young person.
March 31st, 2008
Amanda-It was a lesson learned, so maybe in that old 20/20 hindsight-it was meant to be. Sometimes, we have to go through the bad to learn how to get to the good-maybe that is what it took for you. If you learned and are now responsible with your credit-good for you. Maybe it was a touhg lesson to learn, but you still are benefiting from it! Good for you-24 years old and credit/money savvy!
March 31st, 2008
Momma-EXACTLY! Visa knew what would happen, even though I had been taught well about the responsibilities of credit, I still did what Visa wanted me to do-what a lot of college students (particularly girls) do-Emotional Spending! I was sucked in and thankfully pulled out by my parents!
March 31st, 2008
[...] from Mommy Gets Paid thinks the credit card companies know exactly what they are doing when they raise the college [...]
March 31st, 2008
I can’t believe that they gave a 16 year old a credit card. Do they still do that now? I was 18 when I first got mine and I freaked out when I got into $3,000 debt. Of course I paid it off, but I’m have new credit card debt and it’s more than twice the amount of what I had when I was 18 and I’m 24 now.
I do remember when I was in high school my economics teacher said that waaaaay back in the day credit card companies would even send credit cards to the family dog. I wonder how true that is.
It gets me angry that sometimes we need to depend on credit cards to help us build credit, but credit card companies aren’t exactly regulated by the government. I mean they can change their mind from one day to the next and say they are going to charge you 0% but change it to 23.9%
March 31st, 2008
Jennifer- I am not sure if they do that any more-although I have heard that they target HS seniors-so maybe 17 yr olds about to turn 18. Unfortunately it is a genius move by the credit card companies-they know those kids are going to screw up at least a little.
Yes, you could get a credit card in your dogs name, your deceased relative and your pet rock if you wanted. I’m showing my age here-but all you really needed back in the day was a name, birthday and address. Social security numbers were never checked or at least I don’t think so. It is true- in fact many parents desperate for money would use their children’s names and social security to receive credit or loans. Very scary.
I think we can build credit without going into debt. I think properly paying bills, having savings, and a properly balance checking account should definitely count for more than they do. Responsible folks should be rewarded instead of asked to take on debt to “prove” themselves!
Take Care
LJ
March 31st, 2008
Teenagers and Credit Cards…
Credit Cards-Do Teens and Young Adults NEED Credit Cards?
Weigh in on this issue!…
March 31st, 2008
As a teen and even a college student, I never needed a credit card. Debit card was very useful and it did pretty much everything a credit card could—gas, online orders. It even got some reward points slowly but slowly.
April 1st, 2008
I absolutely and totally refused to let my kids have credit cards, as I had screwed up plenty myself. I refuse to co sign for anything, and I refuse to bail out of anything. BUT I did make my kids sit with me while I paid those bills, and they realized that the reason they had so little money to play with was mom’s outstanding debt. How crippling it was, and how hard to overcome. They understood what it was like to have no choice but to shop goodwill, or do without.
They are now adults, very very young adults. They refuse to have a credit card because I taught them what NOT to do by example. I am both embarrassed by this, and proud of it. If they had not seen what can happen, they may have taken the credit card way out of everything. I’m proud of them and their accomplishments that they achieved on their own, not by a handout, or by taking out credit, but actually working for what they want and getting it when they could.
So do I think a teen needs a credit card? Heck no, and neither does an adult if the play the cards right. I am without credit cards now, and will never have another one. I’ts a matter of principle for me. Never again will I be held hostage by creditors!!
April 1st, 2008
Polly-
Agreed-adults don’t need a credit card any more than teens do! Good for too, on teaching your kids about finances through your own struggles- I bet that will have a lasting impact on their lives. kudos for that.
Take Care
LJ
April 1st, 2008
Mrs Micah-
you are obviously younger than me! Debit cards were not around back in my day…I am old. Just checks, cash and credit cards were available back then. Honestly, I think a Debit Card for a teenager would be a much better choice in teaching them how to budget-they would HAVE to keep track of spending and income if they wanted to be able to make purchases.
Did you find it helped you understand budgeting/expenses better than plain old cash?
April 1st, 2008
I’m a little late on the conversation, but I must say that the comment Polly left was quite powerful to me. When my kids are older and the time is right, I plan on using her advice and letting my debt problems be a learning experience for them. Well said Polly and excellent post LJ!
April 1st, 2008
Kyle-never too late to join in!
I agree with you on Polly’s comments-those are definitely lessons that will stick with kids.
April 4th, 2008
Wow, I can’t believe how much this sounds like my story. I too had a credit card in high school and was very responsible with it (Mom opened the bill when it came so that helped) Then college. By 21 years of age, my hubby (then boyfriend) had $11,000 in credit card dect. We spent years getting out from under that and paying everything off. We now have less than $200 in credit card debt and if there is a balance we pay it off within a couple months. I never want to feel those feelings again or have to cringe when the phone rings! Great article!
April 4th, 2008
realitytrain-Thanks for sharing your story….isn’t it amazing how many people share a similar story? I think creditors know exactly what they are doing when they send cards and loans out to teens and young adults, and like you…I hate that feeling of owing and plan to avoid it at all costs!
Take Care!
April 5th, 2008
[...] of Mommy Gets Paid reflected on her experience with credit cards. They’re not child’s [...]
April 6th, 2008
I read somewhere that college students graduate with an average of $5500 dollars in credit card debt (never mind their student loans). It’s a tough hole to climb out of!
Lisa
April 7th, 2008
It’s funny I don’t recall ever getting any High School Senior credit card offers, maybe Mom cut them up. She did however co-sign for me on my first credit card which had a $1,000 credit limit from my local credit union. You see there I needed to have worked at my current job for 90 days before they would issue me one and I had just started a new summer job between high school and college. I don’t know why, maybe because I needed a co-signer, and it was a credit union they never raised my limit which was great, of course only twice a year was I anywhere close to my limit, (Books) I never was not able to pay it off in full each month. But most important, I think, was the fact that when I got to college I already had a credit card and therefore, I was not tempted to sign up to get one for a free t-shirt.
April 7th, 2008
I think it’s genius AND unethical. I was able to get over $8000 loaned to me when I was 19 over various credit cards. And did I stop there? NO. I paid off some and so the limits were bumped to a total of $15k and I charged up to that much more than once.
I, however, do think back and wonder how financially smart I would be now if I hadn’t run up so much debt… ?? It’s interesting to ponder. I am THIS close to being debt-free today at 22 and the time it’s taken me to pay the debt off, and the struggle I’ve gone through has made me a much wiser, more educated person. I can’t really decide whether it was good or not!
I guess if the limit was $300 for people under 25, maybe we’d all learn the lesson but in a much, much smaller way. I don’t know.
Thank you for this post! You’ve really got me thinking.
April 7th, 2008
As a freshman in college, I can completely understand the temptation to sign up for a card. I have a credit card through a family member that i’m allowed to charge $100 a month to, but none in my name, and I plan to keep it that way. I have a decent job and a debit card, and frankly, that’s all I really need to deal with right now. I like think I’m relatively mature for my age, but even I can recognize that the ins and outs of the credit industry are not something I’m equipped to negotiate just yet.
April 7th, 2008
Shanti-I agree, the lessons could be learned with much lower credit limits! No need go too far into debt to learn that it’s a terrible feeling.
April 7th, 2008
Jane-having a credit card before college and understanding how to use it wisely could be a great thing for some young adults, unfortunately for others credit lines increase or over-spending/emotional spending kicks in and all the lessons learned go out the window-that’s what my experience was.
Thanks for sharing your thoughts!
Take Care
LJ
April 7th, 2008
Lisa-wow….5500 in credit card debt fresh out of school? Not fun. That is a frightening number!
April 8th, 2008
I was sent my first credit card in college, but it took a year or two for me to fall deep into it. Living in a college town is expensive, and hard to do while working part time. I made up the difference with credit cards.
I actually want to thank Bank of America, as they were the ones that increased my minimum payments and shortened my billing cycle. This made me realize that as long as I owe anyone money, they have total control over the terms of repayment. No longer did I see things as a $25 per month minimum payment.
Credit card contracts always specify that the company has the right to change terms as it sees fit. Do they give you the same right?
So thanks to Bank of America, I am almost debt free! Never again will I fall into credit cards. From now on, I will have an emergency fund and plan my expenses. I will live below my means no matter where I am. I will not be subject to usury!
April 8th, 2008
I must admit though, I do sign up for the free shirts… soon as the card arrives in the mail, I call them up to laugh at their 20 something percent interest rate and cancel the card before it is ever activated.
Will this hurt me for a home loan? Putting 20% down and a having a clean record of paying off my student loans will offset that.