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DECEMBER 2003

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.

 

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All material is copyrighted and may not be printed without express consent of the publisher. © 2004.