by Elke C

Created on: January 28, 2007   Last Updated: May 16, 2007

The other day, my daughter aged 14, received a pre-approved platinum credit card in the mail with her name embossed on it. She was so excited because she thought she could now spend the credit limit she was given ($5,000!). She did NOT realize she had to pay it back. She was too caught up in the fact that she was grown up enough that she was eligible for a credit card. Here in lies the problem as to why so many young people go into debt.

All my teachings, about saving money and only spending as much as you have, which she had mastered and was adhering to, seemed to have dissipated. It wasn't long before she had told all her friends and repeatedly asked me to go shopping so she could use her card. I made her cut it up.

My best advice for young people is don't get caught up in the excitement of the credit scheme. Look around and you will find so many examples of how you can get "free" stuff.

1. Credit cards are available to anyone and you don't need a credit history.
2. Buy furniture and appliances and don't pay for a year.
3. No money down and no interest for a year and you can drive off the lot with a brand new car!
4. Are you in school to become a lawyer or a doctor or any other degree with high earning potential? Banks will open lines of credit for you before you have even received your degree.
5. Mortgages and loans are the same culprit in disguise. Look at how much interest you will pay by the time a mortgage has run it's course. Even with a low interest rate you can easily pay double your original amount if you don't accelerate the payments.
6. In Canada, you can even receive a credit card from check cashing stores. So, those people who don't have enough money until their next pay cheque can now receive their money early for a fee and then overspend using their credit card so that by the time they are paid they owe money!

The reason money on credit is so readily available is because the card companies (and banks) make huge profits from lending you, the consumer, money. They are not your money manager. The credit institutions will not warn you that you will owe thousands in interest and never pay off a card if you only pay the minimum balance every month! Yet even though you are swimming in debt, the banks will give you a GOOD credit rating as long as you pay the minimum. Do you see the irony?

Credit is a vicious cycle. Be patient. Save your cash and buy only once you have the cash. You might not be able to have what you want right away but you won't have what you don't want...never ending credit debt.

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