I’m a big fan of Kevin Rosen, columnist for the Kansas City Star. He writes high quality columns about kids and money on a regular basis. However, one of his recent articles has drawn a lot of heat. In the article, Kevin made the following statement:
Wouldnâ€™t it be nice if our children grew into adulthood in a world without credit cards? Look at all the problems that would be solved in a cash-and-carry society â€” no gut-wrenching debt overloads, no junk mail from credit card issuers, and perhaps most important, fewer opportunities for cyber thieves to steal our identities.
It’s an interesting idea – could you live without credit cards? Do you wish society didn’t have credit cards?
He received a ton of responses to the piece from people criticizing his head-in-the-sand approach to credit. But some of the responses, listed below, provide some valuable insight into the way people think about credit. In fact, the following statements prove to me that most people believe credit cards are a good thing, when used wisely.
â€œEasy credit is ubiquitous in our society. If it isnâ€™t bank plastic, there are pay-day loans, no-interest mortgages and floods of home-equity loans. â€
On credit cards and children:
â€œI gave them credit cards about the same time they got driverâ€™s licenses. Of course, these were cards on my accounts with their names on them. And when the bill arrived every month, I knew exactly what they had spent and on what.
By laying down the rules this way, I required they pay off their balance every month. If they didnâ€™t have the money, I took the cards back and deducted it from their allowance until the debt was paid. Being denied allowance was a shock, and they quickly learned the basic lesson â€” credit cards are not free money; it has to be paid back.
My kids â€” one recently graduated from college, and the other a senior â€” have their own credit cards today but use them strictly as convenience cards. There is no huge debt being amassed. They already learned the lesson firsthand but under conditions where things would not get out of control.â€
â€œI am a Depression child. I was taught to only buy what I could pay for. You certainly wonâ€™t get in financial trouble. I have tried to live up to this, but I have had cash refused. I have never thought I would experience this. This is scary.â€
Earlier this month, student loan provider Nellie Mae surveyed graduate-school students about credit-card usage. Among other things, the report found that 93 percent of these highly educated students try to pay at least the minimum monthly requirement, but only 20 percent acknowledged paying off their credit card bills in full each month. Thatâ€™s maddening, and signals an ongoing need for credit education in classrooms and on the home front.
But I whole-heartedly agree with Kevin’s basic thoughts on putting credit cards into the hands of college students: Don’t even think about it until your child can handle cash responsibly and has a firm understanding of the benefits and dangers of using credit cards. It also doesn’t hurt to help them set up something like an automatic withdrawal from their checking account to pay off the balance each month.
I love the convenience and purchasing power that credit cards offer people. But without the proper education, credit cards can turn into your worst nightmare.