Dillard University alum and graduate student Charlotte Lovelace said she was ready to have a credit card when she turned 18.
She said, "Credit cards are for emergency expenses in the event I do not have enough money to cover certain necessities."
Financial discipline is imperative when aiming for a healthy financial record when dealing with credit cards. Sometimes the desire to spend is far stronger than the need to save; that's when debit cards, especially prepaid debit cards, become invaluable.
The difference between a debit card and credit card is that it's usually harder to spend money that you actually have. Credit cards typically aren't as "final answer-ish."
Even better for people who haven't perfected their budgeting skills is the prepaid debit card. This card is sometimes not linked to a bank account but, more importantly, it is not an extension of your checking account.
The prepaid debit card has it's own separate account that only gives you access to the amount of money you've placed into the account. It's similar to a regular debit card except the penalties for spending more than you'd like are limited. Once you've met your limit, you simply cannot use the card until you place more money into the account.
Ken Uffman, of the Louisiana Jumpstart Coalition for Personal Financial Literacy, says the benefits of using a debit card instead of a credit card don't especially help with establishing financial responsibility and literacy.
He goes on to explain that financial literacy and responsibility are methods to eliminating a number of problems in the future. There are a number of consequences to having bad credit and one of the biggest ones that many people seem to overlook is trouble in the job market. "There are a number of good students who can't get jobs because of bad credit," Uffman says.
He adds, "Though a job search may seem unrelated to bad credit, many companies are beginning to add credit checks in addition to other background checks on applicants before offering a job. For employers, it offers a way of tracking the applicant's level of responsibility."
Lovelace advises young adults against spending money they don't have and what they could possibly never make. She also wishes she would have known about "annual membership fees."
Some tips from Uffman for teenagers and young adults in dealing with credit cards and budgeting:
- Pay yourself first.
- You cannot properly budget if you have not set aside a specific amount for your savings account.
- Before marriage, couples should review each other's credit background and history.
- Don't ignore the consequences of defaulting on credit accounts.
- Parents should get their teens a low-limit credit card, if getting a card is necessary.
- Parents should explicitly explain the downfalls of not being a responsible consumer.
- Check credit reports on a regular basis for any incorrect information or identity theft.
- If you suspect identity theft make a police report and contact a credit bureau.
- Buy credit card reports at least four months apart.
- Focus on purchasing your needs instead of your wants.
- Remember that once you defer, you will end up paying more for the product than it's worth.
- Track your expenses for one month to pick up on and address patterns.
Lovelace says she has no financial regrets but says she's actively saving for the future. When asked if she's concerned about having credit issues in the future she responds, "No, I try to stay on top of things like that."
Unfortunately, she may be the atypical 22-year-old.
