Credit Advice for Youth

Posted: November 14, 2006 in Blogs I'm reading!, Budget, Consumer Issues, Credit, Finance For Youth, Life, Saving, Spending

A lot of people have advised young people who were interested in establishing credit to start with a gas card, or a specialty store credit card.  I suppose that this method will establish credit, and if that is your only goal, then I suggest you apply for one of these cards.  Our goal at Finance For Youth is not just to establish credit, but to establish a smart financial mindset for those who wish to do better.

I advise that you never, EVER, EVER put anything on credit that will not last as long as the payments you will be making for it.  Gas is one of those things.  With gas hovering around the $3.00 mark, and with gas card interest rates somewhere near, or over, 20%, you will be paying for a tank of gas today for the next three years!  And just to be clear, I understand that some places tell you to pay off the balance every month, saving you the high interest charges.  THEY don’t seem to understand that this also mitigates some of the gain you will make on establishing strong credit.

Creditors have long ago picked up on the tactic of paying a balance off every month, and they understand that this practice says nothing about your ability to establish a payment history (or a steady stream of income for them), although it will show how you manage your escalating debt, because let’s face it; we’re young, and most of us just aren’t going to pay off our cards.  The smart ones will.

I’m not saying I’m against getting a gas card.  I think they can be very useful, if they are used only when needed, as an emergency gas fund.  I cringe a little when I hear advice to use these cards in the quick-mart at the gas station, and I throw up a little when I hear advise to use these cards at the restaurant.  Of course, emergency situations are different.  If you are stranded in the middle of BFE, (or the middle of Nowhere for those who don’t know) and you need to eat or get your car repaired, charge it!

Next time, some better ideas for emergency planning!

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