Until
reading the article "Does your teenager need a credit card", I didn't
really start thinking about credit cards too much and I didn't really recognize
them as an important topic. As I am too young and too inexperienced to
understand the importance and purpose of credit cards, I wanted to first get to
know the subject matter before deciding whether I support teens having them or
not. I searched for some information and I also talked to my brother Dario, who
just recently got his own VISA and has his G2, about credit cards, possible
alternatives and ways to teach teens to be financially responsible. After
lengthy discussions I came to realize that I do not believe that it is the best
option for teens to have credit cards in a way that it is described in the
article.
By definition, the word credit means "the ability of a
customer to obtain goods or services before payment, based on the trust that
payment will be made in the future." Credit cards are basically just cards
that let you borrow money from the bank. Of course, like anything else in life,
what you borrow you must return, and when not returned, there are certain
consequences - namely, in case of credit cards, very high interest rates.
Although it may seem like a really good thing that you can just spend all the
money away, and despite the pricey cost for it, it can be REALLY tempting, and
if too much money is spent then it can be really hard to pay back.
Debit cards on the other hand, I believe, are a very good
alternative. They are better solution for emergency situations as well as to
financially educate kids. While you can still spend all of the money, you don't
have to pay it back, but at the same time you need to earn/save that money
before you start spending it. It can both teach teens to be responsible when
spending money, and it is very easy to transfer money from a parents account in
case of an emergency. To use my brother as an example: if need be my parents
transfer money online to his savings/checking account he can access that money
instantly, while if they transfer money to his credit card for the money to
show up on his account takes a day or two.
While credit cards are quite good when it comes to emergencies, I
think it might not be the best tool to teach teens about responsible money
handling. While buying things on credit can be good for large amounts of money,
they can also be very tempting to spend. Growing up in a world full of peer
pressure teens can easily be tempted to spend "their unlimited"
amount of money on things they really don't need. The author of the article
acknowledges that credit cards can be financially dangerous in the hands of
irresponsible teens and advises parents on how to avoid the possible dangers of
credit cards. What the article fails to do is explain is why, besides
"building" a credit history opening teens up to these risks is
necessary at all, BEFORE young adults learn to handle money that they really
have. So, I think that alternatives, like using debit cards, might actually be
better than credit because they teach young adults good financial habits.
Rather than rely on someone else to bail you out in an emergency, debit cards
teach you how to be self-reliant and save for a rainy day. Both my brother and
I have savings accounts that are easily accessible by debit cards, and we both
agree that debit cards are a good way to teach people to save your own money
and make you fully aware when you spend more than you can afford.
After all my research on this very complicated topic, and the lengthy
discussion with my brother, I have decided that I do not agree with teens
having credit cards in a sense that it is described in the article. I believe
that teens should be first taught to be responsible when spending money. Credit
cards give the feeling of "unlimited freedom", but lets face it...
that's just not the truth. Why put anyone in a situation like that before they
are financially educated. Teens can have their OWN credit cards when they turn
18. By that age, I believe, all of us should be able to learn how responsibly
to handle money, and it is still not late to start "building" our own
credit history.
