Why You Should Never Own a Credit Card
Saturday, July 8, 2017, 6:00 AM | Leave Comment
The amount of debt carried by teens and young adults from the ages of 18 to 24 has gone up over 100% since the year 1992.
Given that as these young adults are spending up to 30% of their income to pay for this debt, it is important that teens and the parents of teens address the credit-card debt issue.
Here are a couple of reasons why parents and their kids should talk about how debt can be eliminated and why it’s important never to own a credit card.
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The Demographics
Teens are the target for credit card companies nowadays. In fact, the marketing of credit cards to teens and young college co-eds is so common, that many teens and parents of teens will argue that these young adults should get credit cards in order to establish credit.
However, a credit score and even the infamous FICO score, which is necessary to buy a home with a mortgage (with some exceptions), relies on a person getting into debt.
Basically, the person who has a credit score is advertising how much debt he/ she has had in the past in order to get more debt in the future.
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Compounding the Issue
Many people in this age demographic will go on to attend college. Many of these same people will allow themselves to take on student debt in order to pay for their educations.
Additionally, many who get student loans may be lulled into a false sense of complacency due to the fact that they will not have to pay for their student loans until they finish school.
The average graduate leaves school with $37,000 in student loan debt.
Chances are good that these same student loan borrowers will end up with about $5,000 in credit card debt, leaving them with more than $42,000 of debt once they leave school.
In light of this, it is imperative that teens and the parents of teens educate themselves about possible financial alternatives.
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Dealing With Debt
The best way around credit card debt is to not get into it at all. The same can be said for student loan debt.
It’s best to come up with a savings plan that allows these teens to go to school debt-free.
They can check to see if their high schools offer any courses that can go toward their lower-level college requirements: These options usually cost substantially less.
They can also look for scholarships and grants to pay for these expenditures.
However, doing this requires discipline, and many young people already have credit cards and an abundance of student loan debt.
Bankruptcy is on the rise among these young adults.
In fact, one out of every five bankruptcies that is filed is filed by a person of this age demographic.
While bankruptcy can be a negative, it does have a silver lining. Many who file bankruptcy get a fresh start, one that allows them to start taking care of their money in a much more responsible way.
If this turns out to be a last resort, these young people will want to get educated about how money and savings work and start their new financial lives with not an emergency fund.
They should also start socking away at least six-month’s worth of income. This teaches them to start looking at their money from the long view.
Final Thoughts
When it comes to getting out of credit card debt, it’s best just to avoid it. Unfortunately, teens happen to be the biggest market for credit card companies at the moment.
Teens and parents of teens should be educated about how to live life without credit cards. It is possible. It just requires the financial know-how in order to do it.
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