It's not only possible — but crucial — to teach teens good money habits before they go to college. As children enter the early teen years, many will want credit cards — especially since credit is commonly used to facilitate online transactions. Before jumping into the world of credit with your child, establish a joint checking account as a reward for attaining earlier savings goals. Teach him or her how to balance a checkbook, emphasizing that this convenience requires a great deal of personal responsibility. Just like saving up allowance, the money can only be spent if it is available — do not permit the bank to offer overdraft protection. Monitor how your child handles this responsibility. If you are satisfied with your child's spending habits, you may consider a check-cashing or debit card in the early teenage years to access the checking account.Card issuers can't market credit cards within 1,000 feet of a college campus, the Federal Reserve.Card issuers will be prohibited from marketing credit cards "near campus." The act bans any "tangible item ... such as a gift card, a T-shirt, or a magazine subscription" but does not prohibit discounts, rewards points or promotional credit terms to attract customers. The prohibition applies to mailings to students living on or near campus as well.On the other hand, if the tangible item, such as a refreshment, is offered to a student regardless of whether they apply for a card, it is not considered an inducement.The Fed struck all reference to parents, legal guardians and spouses included in the original language, reasoning that simply any individual over 21 years of age "having a means to repay debts incurred by the consumer" may qualify as a co-signer.
As your teen assumes greater responsibility with money — and perhaps with other duties, such as household chores -- a credit card can be a good option, if chosen and monitored carefully. There are many forms of pre-paid bank cards which function like debit cards and teach kids that deferring payment is not the same as having "free money." It is important to demonstrate that the power of credit can quickly exceed its convenience through high cost finance charges and fees. Use a calculator (such as the "Debt Zapper" — see sidebar) to show the real cost of purchases on a card with a revolving balance, and how increasing monthly payments and lowering annual percentage rates will lower overall costs. The key is to emphasize that impulse buying on credit entails paying more later — sometimes much more — which can mean painful future sacrifices.What do the banks gain from getting as many students as possible to use their credit card? The answer is simple: lifetime customers. A credit card is a good way to introduce students to the bank. The bank assumes that when the students graduate, they will get fairly high-paying jobs and spend more money with the credit card they've already been using. The bank wants students to be comfortable with that particular bank so that after graduation, when they have more financial responsibilities, they'll want to use the bank's other services.
http://www.taocredit.com/
Subscribe