Kids and Credit Cards
While I was getting my weekly latte and muffin, the owner of the coffee shop mentioned that she was concerned with young adults being offered credit cards with high limits and that they did not yet have the life experience to use them properly.
Credit cards are a good way to establish a credit history which is needed when applying for loans or mortgages and they are convenient when travelling, that is all!
Gail Vaz-Oxlade, the host of the television show “Til Debt Do Us Part” and the author of several books, some of which can be borrowed from the Fernie Heritage Library, provides the following advice on how to establish a good credit history:
1. Pay your bill in full every month. Carrying a balance will not help you build your credit rating and you will be paying a high interest rate.
2. Choose a card that gives back. Some of these cards have reasonable fees and you can trade the points you have earned for merchandise, travelling, etc. Others even offer “cash backs” of 1% on your purchases.
3. Keep track of how much you spend. If you don’t, you may find that you are spending more than you can afford to pay when your bill is due. Use a journal or add-up your receipts once a week.
4. Review your credit card statement every month. You need to make sure that the charges on your statement are for the same amounts as on your receipts.
5. Check the du date. The credit card companies change them. You can have the same due date for months and then they bring it back by a week! They need to make money by charging interest on late payments and this is one of the ways they do it.
The ideal situation is to start with a limit of $300 to $500 and to go from there. If the credit card company increases your limit, you can call them and ask them to lower it to the amount that suits your situation.
I don’t believe that you need a credit card with a high limit to build your credit history, you can keep it at $300 as long as it is paid in full every month.
One of the few advantages of using a credit card is to make your purchases based on your statement periods. For example, your statement period is from May 19 to June 18 and your payment is due on July 14, and need you need to purchase tires for your car; buy them on June 20 so that you will not have to pay them until August 14.
Credit card companies are there to make money, so beware!
Talk to youe friends and family and asked them what they do not to get in trouble with their credit cards. If you don’t feel the need to have a credit card, you may want to consider getting a prepaid credit card. It is basically like a gift card but you put your own money on it and it’s great to have when you’re travelling!