Action Line: Teens must be smart when it comes to credit cards
| Friday, Sep 03 2010 09:00 AM
Last Updated Friday, Sep 03 2010 09:00 AM
Editor's note: Action Line is a weekly column from the Better Business Bureau answering consumers' questions and concerns about money and business issues.
Dear Action Line:
My son is graduating next spring and is already preparing his applications for the universities he is interested in attending and has done his research about possible scholarships and financial aid. What amazes me, however, is the number of credit card offers he has received saying he is pre-approved for a credit limit of up to $5,000. All he has to do is fill out and return the form to receive his credit card.
He is only 17 and thinks this sounds great but I am worried about the offers. Can he actually get a credit card if he is not 21? He plans to work while he goes to school, but who will be responsible for the bill if he can't make his monthly payment?
Dear Reader:
At 17 you can have a credit card, although since your son is under 18, he will be unable to legally hold the card on his own. He will either need a cosigner or be listed as an authorized user on one of your credit cards. As a co-signer you will be responsible for the bills if he can't make his payments and any late or missed payments will go on your credit history as well as his. If the card is issued after he is 18, and there is no co-signer, he will be solely liable for the account.
Kids today are exposed to credit at much earlier ages than in the past. Many parents list their kids as authorized users on their credit accounts so they can make purchases at the mall or allow access to account numbers for online purchases. Because of this, it is never too early to teach your son the difference between wants and needs (often a difficult distinction for all of us, regardless of age!) so he can develop wise spending habits.
Remind him that "wants" are items you'd like to have but can easily do without, like a new video game or a $4 smoothie. Needs are items you can't live without, like food, housing and getting to work.
A good site to check out for more information on teens, credit and wise spending is at Experian (http://www.experian.com/credit-advice/topic-minors-credit.html) one of the three major credit reporting bureaus. You can also order a booklet on learning to use credit wisely from Consumer Action (http://www.consumer-action.org/english/articles/families_and_credit_cards_eng/).
Teens frequently think that what they do before age 21 will not follow them forever. Wrong. In terms of credit history, "forever" is only seven years, but that seven years can seem like a lifetime as a teen progresses into adulthood and wants to buy a car, a home or even apply for a loan. A good credit history is one of the building blocks for a successful future, just like a good education. Wise spending habits include monitoring your ability to pay for what you purchase and that is something we should all learn sooner rather than later.
Vickie Sanders is assistant director of business services for the Better Business Bureau serving Central California. Send your consumer concerns, questions and problems to Action Line at the Better Business Bureau, 1601 H St., Suite 101, Bakersfield, CA 93301 or vickie@bbbcencal.org.
