What’s not to love about credit cards? Credit cards offer a convenient way to make purchases. Other benefits include the opportunity to build credit, earn rewards and cash back, and protect against credit card fraud. But what do we hate? It’s those pesky credit card fees!
How can you make the credit card experience better for you and your family?
- Start by educating your kids when they are young.
- Prepare your teens for life beyond high school.
- Understand why and how credit card fees happen.
- Most of all, train yourself and your kids on how to avoid user-generated credit card fees entirely.
Talk with the kids
Explain that when you swipe your credit card you are “borrowing” money. Explain that spending with a credit card creates a bill that has to be paid the next month.
Use a piggy bank analogy to help your kids understand. Explain that a credit card lets you borrow money from someone else’s piggy bank.
That piggy bank lends money at no charge during the grace period, roughly a month. If the balance isn’t paid in full when the grace period ends the piggy bank adds interest to the balance. Interest continues to be added until the entire balance is paid.
Young adults and credit cards
Using a credit card is a good experience for teens and young adults. Help your kids learn to be responsible in managing their use of credit cards.
Consider these statistics about college students. According to a Sallie Mae’s 2019 Majoring in Money report, the average number of credit cards students hold is changing. In 2016, college students with at least one credit card only carried an average of three cards, the survey reports, compared to an average of five today.
Overall, however, many college students are practicing good money habits. The report shows that more than 70% of college students say they pay their bills on time and just over half track their spending.
Credit card fees explained
Start by learning more about credit cards yourself and talking about this information with your teenage and college-bound kids.
Read this useful analysis of credit card fees prepared by U.S. News and World Report. 2019 Credit Card Fee Study: What’s Normal and What’s Not?
Win-win credit card scenario
When used responsibly and paying the bill in full each month there will never be late fees or interest. Understand and follow the rules and you will never be assessed unnecessary credit card fees. It’s a win-win for everyone!
Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children that money is a number with kids as young as pre-school and continuing through high school.