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Date Added: May 1st, 2004
By Chris Stallman
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Just about
every teenager can't wait until he or she gets their first credit
card. It's a chance to become more independent. It gives
them more convenient ways to pay for things. And they can
finally start ordering things online without bugging their parents
to use their credit cards.
The Dangers of Credit
Credit is dangerous. We hear about it all the
time but we usually ignore it. So sometimes it takes numbers
to get people to pay attention. $2,750. That's how much
the average college student owes on their credit card right now.
500,000. That's the number of people under the age of 35 who
have filed for bankruptcy in the last five years.
Unfortunately, too many people who have a credit card
get into the mindset of "buy now, pay later." It usually starts
out with "I get paid next week so I'll go out and buy $100 of clothes
now. I'll just pay it off when I get my paycheck." But
then some unforeseen expenses come up and next thing you know, you're
carrying a balance that's growing and growing.
When a bank or other financial institution issues you
a credit card, it's not because they like you. It's because
they can charge you interest. And being young, they can charge
you a lot of interest. So when you buy something and it takes
you a while to pay it off, you can end up paying a lot more than
you thought. That $300 CD player for your car might sound
like a great investment but a couple years from now when you've
paid $800-900 for it because of interest, you'll really be hating
yourself.
The truth is, nobody ever thinks they'll have credit
problems. But so many Americans do. And it's especially
a problem for college students who find themselves out on their
own for the first time in their life with no major income but lots
of major expenses (books can cost $1000 per school year!).
That's why it's important to really limit yourself to your credit
uses.
Your Credit Report
You can read
more about your credit report here
but we'll touch on it briefly. Basically, your credit report
is like a permanent report of how you use your credit. Every
time you apply for a credit card, finance a car, rent an apartment,
buy a cell phone, or take out a mortgage, your credit report will
be examined to see if your credit is good enough.
As you can tell, it's pretty important to have good
credit because it affects whether or not you'll be able to buy a
car or house in the future. So I recommend periodically checking
out your credit report using a credit reporting service. You
can find these all over the internet.
An Alternative to Having a
Credit Card
You can get a credit card when you're as young as 16
if you have a parent to sign on your account with you. But
I do not
recommend getting one until you're 18. If you've got a bank
account, I recommend starting out with a debit card. You still
get many of the conveniences of a credit card without any risk.
That's just a short introduction to credit. Check
out our credit section periodically for new
articles, as we'll be adding more every couple weeks.
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