Explaining Credit Card Terms to Your Teen
Learning how to manage a credit card is something that everyone needs to learn at some point in their lives, much like learning how to write a proper resume. Credit cards are actually becoming a really popular option for teenagers, and many parents are using them to help teach their kids responsibilities. If you are thinking about getting a credit card for your teenager, then you need to make sure that your teen understands the importance of having a credit card and how it should be used.
One of the the things that you need to focus on when you are thinking about giving your teen a credit card is explaining the terms to them. Every teen is going to benefit from knowing about these important issues, as it will help them to make better financial decisions. If your teen does not learn about these terms, then he or she could get into a very difficult financial situation. As such, you need to take it upon yourself to sit down and explain things to your teen, so that he or she can make the best decisions about his or her credit cards.
Terms to Explain
One of the most important terms to explain to your teenager is the annual fee. An annual fee on a credit card is going to be a yearly charge that your credit card is going to charge you. Most of the time this fee is used to cover some of the administrative costs of handling your account throughout the year. Not all companies are going to charge annual fees, so you should try to help your teen find one that has no fee or at least a low fee. If your teen is aware of this fee and what it means, he or she can look for cards that don't have one.
Another very important term that you need to discuss with your teenager is the annual percentage rate on the credit card. This will help determine how much your teen is going to have to pay in interest on the balance of your card. The key is to get a credit card that has a very low annual percentage rate. One of the things that you need to be aware of is that some card companies will give you a low annual percentage rate for a year and then hike the rate up significantly.
Another basic thing that your teen needs to understand is the credit line on the card. The credit line is the amount of money that you can spend on a credit card. Your teen needs to be aware of this, so that he or she does not go over and end up getting charged a lot of extra fees. Make sure that your teen knows what the consequences of going over the limit on the card are, so that he or she can avoid it and keep the credit score up.
Credit Card Options for Teenagers
There are a lot of different options for teenagers when it comes to credit cards. Most companies make special credit cards for teens that are backed by a deposit that you make in the beginning. The teen will be using these funds when he or she uses the card, and the payments that you make on the card will end up replacing the balance. This is a really great way for teen's to learn responsibility and become more like adults. Take the time to sit down and go about explaining credit card terms to your teen.
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State Guides to Credit Card Laws
- North Carolina
- West Virginia