What You Need To Know
About Managing Credit Cards
by Patricia Flaherty McNeilly, M.B.A., Financial Advisor
Teens are ringing up too much debt
too fast, with all the related problemsÑimpulse buying,
overspent budgets, and bad credit. What's the solution?
When today's teens go away to college,
they carry two instruments that prior generations lacked:
personal computers and credit cards! According to Nellie
Mae, the national student-loan financing corporation, 83%
of under-graduate students have at least one credit card,
and the average balance owed is $2,327. Adding to the challenge
are savvy marketers and advertisers who spend billions of
dollars each year trying to convince us that we "must
have" more than we can afford.
What's wrong with this picture?
It suggests teens are ringing up too much debt too fast,
with all the related problemsÑimpulse
buying, overspent budgets, and bad credit. What's the solution?
For teens, as for adults, there's
no elixir that will cure problems caused by poor credit habits.
The key is to practice good credit behavior now to prevent
problems later. Here are some specific steps you could take:
Understand that credit is a major responsibility. It's tempting
to apply for credit just to get a discount on purchases,
or to get a gift, but beware! There are consequences many
teens overlook. For example, each application "trips" an
inquiry on your credit history. An inquiry simply confirms
that your credit history was reviewed in response to an application.
Creditors always check on recent inquiries. Too many inquiries
and it looks like you are desperate for credit. That makes
you a potential poor risk, which could negatively affect
your chances to obtain credit. And inquiries stay on your
credit report for two years!
Choose credit cards that charge a low monthly interest payment.
When possible, pay more than the
minimum amount due. A $1,000 credit card balance can take
many years to pay off if you only make minimum required payments!
If you need to "roll over" a
balance, make sure that you create a plan to pay it off in
a short period of time.
Pay bills on time. Making timely payments is critical to maintaining
a good credit history and credit rating.
Only buy within your budget and don't charge more than you
can pay each month.
Save all receipts and match receipts
with actual transactions posted on the monthly credit card
statementÑstatements
are often accessible online, as well. Once a month, compare
your statement to your actual budget and make adjustments.
Prevent credit card fraud. Safeguard your personal information.
Never lend credit cards to anyone and never leave cards or
receipts lying around. Keep card numbers, expiration dates
and telephone numbers in a safe place separate from cards.
Today, it is realistic for teens
to go away to college with at least one credit or debit card.
The goal is to go into the world with confidence so that
you won't owe "an arm and
a leg."#
The Guardian Life Insurance Company of America awards college
scholarships to girls ages 12 to 16 that demonstrate budding
entrepreneurism, are taking the first steps toward financial
independence, and are making a difference in their school and
communities. Scholarship prizes totaling $30,000 are awarded
annually. Nominations for the 2004 Girls Going Places Scholarship
Program are due on or before February 27, 2004. Today's young
women enjoy limitless opportunities and bright horizons. We
have long supported this spirit of achievement and will continue
to do so for generations to come! For a Girls Going Places
College Scholarship entry form and program rules, visit: www.girlsgoingplaces.com
or write to The Guardian Life Insurance Company of America,
Attn: Girls Going Places, 26-C, 7 Hanover Square, New York,
New 10004.
Patricia Flaherty McNeilly is Financial Advisor, Guardian
Life Insurance.
