What to think about before applying for that credit card …

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What to think about before applying for that credit card …

By Alexis Cook, Staff Writer

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There are pros and cons to everything in life, including opening a credit card. Teens who lack knowledge about credit card basics can quickly find themselves in debt and with a bad credit score. 

Cardholders are in charge of using their cards responsibility while also keeping up with the monthly payments. Something as simple as a lack of education can result in over spending and irresponsible usage. 

Robin Holweger, Financial Literacy and Marketing teacher at Fairmont, used to be a marketing coordinator for the Limited Credit Card Services. She has learned all of the ins and outs of credit cards over the years. 

“Credit cards are great in times of emergency when you can’t pay for something in cash, but people just have to remember to keep up with their monthly payments,” Holweger said.

Many argue that in order to establish a credit score, you must have a credit card. Likewise, you must have a good credit score in order to get loans on houses, cars and other major life purchases. But, is this actually true?

When Holweger was in college, her parents got her a credit card and had her charge small amounts like $20 each month. She made sure to pay it off by the end of the month, with the goal of building and boosting her credit score.

“One of the biggest mistakes I see most teens and young adults make is when they apply for too many credit cards. You really only need one or two. Everyone wants to give you a credit card and it can doom your credit score by over extending your purchasing power,” Holweger said.

According to The Balance, the average credit card debt per U.S household was $8,316 in February 2019. Ages 18 to 24 are the highest source of debt according to an article by the Consumer News and Business Channel.

Holweger’s tip to young teens is to have parents set a limit on the credit card so that the teens aren’t tempted to go out and spend a bunch of money they don’t have. 

Another option is to work with a local credit union, who will usually offer teens the opportunity to establish credit by way of a collateral savings account.  

For example, people can deposit a certain amount into an account, then they will be issued a credit card where they can charge up to that amount. This type of credit card/savings account allows a young person to establish credit, while at the same time, protecting them from overspending and credit card debt.

“Credit card companies want to promote their perks, discounts and exclusive options to make the customer feel special by getting privileges to people who don’t have the credit card, however most of the time these are the credit cards with the higher interest rates. The perks most at the time aren’t worth it if you’re paying such a high interest rate,” Holweger said.

When picking out a credit card, people should shop for it just like anything else and pick out the one that best meets their needs.

“The Schumer box is very helpful when comparing and shopping for different credit cards. This requires that companies have an easy-to-read box that tells the rates, fees, and terms and conditions of a credit card agreement,” Holweger said.

Other things to look for are easy payment options such as online, no annual fees and low interest rates. Many credit cards offer rewards programs and points as well that can be useful to certain customers. 

“Credit cards can save you in emergencies, but they can also ruin you if you use them incorrectly,” Holweger said.