Parents should get ready to have a big talk with their kids. I don't mean sex, drugs, or even their college education, but something more easily looked over and forgotten -- credit cards. Last year, Discover Financial ran a survey of 2,000 millennial that found 80% consider themselves financially responsible. Despite this, only 1 in 4 knew their approximate credit score. It's little surprise, then, that CNBC recently reported on a survey that found 68% of Americans make at least one major credit fumble before turning 30.
In the thousands of lessons parents hope to impart on their children, proper use of credit cards is often forgotten. However, given the growing average credit card debt in America, which now stands at $15,779 for indebted households, it's a talk that should garner greater attention. Here are the 4 important points everyone should hit when talking to their child about credit cards.
- Credit cards are not a tool to increase buying power. One of the biggest traps an individual can fall into is confusing their credit limit with their spending budget. Minimum payments give us the impression that we can put off paying off a charge for months at a time. At what cost? Some arbitrary thing called an APR. This is what leads consumers down the path of buying things they cannot afford, trapping themselves in a cycle of debt. Make sure your child understands that the only purchases that should be put onto a credit card are ones they can pay off completely at the end of the month.