Credit Cards on Campus (page 2)

By — Center for a New American Dream
Updated on Jul 26, 2007

Less Plastic and More Freedom

It is imperative for parents to discuss the potential social and economic consequences of debt-based consumption with their children as soon as they are able to recognize the advertising messages that define the pop culture of their youth. Persistence and determination are needed to counteract these pervasive messages of instant gratification — but it is possible to break the cognitive chains that associate "fun" with purchasing more "toys."

You can emphasize the positive power of savings to kids at a very early age. Encourage or enforce a savings plan with young children, such as putting 20 percent of his or her allowance into a special bank account, to demonstrate that spending is linked to the money he or she has available. Calculate the cost of a desired activity or toy in terms of the number of weeks your child must wait to earn it with savings. The child may become frustrated by this process — especially if he or she is accustomed to mom or dad buying the toys — but it will be more significant to the child through the process of using his or her own money, and waiting to earn it teaches the power of delayed gratification.

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.

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.

In addition to chaperoning your child through different financial lessons, it is important throughout this time to discuss the temptation of money, the lure of advertising, and the blurring of "needs" with "desires." Balance savings objectives with rewards for meeting specific goals, discuss money matters clearly and often, and of course, model responsible habits in your own financial life, or many of these lessons will be lost.

Today, the mantra of "buy now, pay later," is portrayed in the mass media and popular culture as the new values of the "Just Do It!" generation. Too often, financial irresponsibility is portrayed as a benign rite of passage as our youth make the transition to the personal responsibilities of adulthood. In reality, many youth find their personal relationships and professional careers ruined without an informed view of the power of plastic. By equipping our teens with appropriate financial skills, we can replace the seduction of "stuff" with the rewards of personal empowerment and self-fulfillment.

Robert D. Manning is a University Professor and Special Assistant to the Provost at the Rochester Institute of Technology. He is the author of Credit Card Nation and the forthcoming Give Yourself Credit! He frequently testifies before Congress in defense of citizen consumer rights and serves as an expert witness in federal and civil suits against the credit card industry. He is also President of Newtonian Finances, Ltd., an education and research firm which will introduce financial literacy/credit card education programs in several colleges this fall.

Online Financial Resources

Whether you're finding ways to teach money skills to your kids, helping someone get out of debt, or looking for ways to reduce your own bills, many great debt- prevention resources are available at Dr. Manning's web site,, including:

  • "Debt Zapper" calculator. Helps calculate the true cost of credit cards with finance charges and fees, and helps demonstrate how paying more than the  minimums and finding cards with lower annual percentage rates can significantly  lower costs. "Budget Savior" estimator: Helps students create realistic post-graduation budget plans based on estimated income, the cost of rent and bills, and student loan and credit card payments. Quizzes on financial literacy. Not just for students! Information on how to compare credit card offers.
  • Reports on use of credit cards on college campuses.

Even if you don't surf the web, you can read up on credit card practices and how to teach kids of all ages good financial habits. Many helpful books are available, including: Debt-Proof Living and Debt-Proof Your Kids by Mary Hunt, The Kid's Guide to Money by Steve Otfinoski, and What Kids Really Want That Money Can't Buy by Center President Betsy Taylor.

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