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Teenagers & Credit Card Debt

Lenders have long targeted college students with credit cards, and that demographic has paid the price with high interest rates and insurmountable debt. However, the marketing efforts of credit card companies are focused on even younger populations now. The new prize market for credit card companies is the high school population, and they are succeeding brilliantly in winning over these young teens. Indeed, nearly one-third of high school seniors report having a credit card. Though this introduces teens to the world of financial responsibility early in life, some experts worry that they are ill-prepared for the task. We’ll discuss this issue in more depth here.

The Road to Debt

With unremitting marketing efforts on campus, it’s no wonder so many college freshman fall prey to high-interest credit card offers. But recent studies indicate that the debt plague of the youth often begins long before the freshman year. It is now not uncommon to see high school seniors with plastic, either because they signed for the card in their own name or a parent co-signed for them. Between 1999 and 2002, the number of incoming college freshman with a credit card tripled. The average debt for those freshman credit cardholders was $1,585. In other words, these young people have already set a precedent of debt before they really embark upon their adult lives.

Targeting Teenagers & Mothers

Though most consumers are unaware of the unscrupulous practices of credit card companies, these businesses continue to target teens and parents in surreptitious and cunning ways. For example, many credit card companies will send credit card solicitations that are co-addressed to parents and minors. Parents argue that teenagers are barely learning to deal with responsibilities like academics, driving, etc., and are not ready for the temptation of a license to spend.

The Danger of Ignorance

Many adults don’t quite fully grasp how credit cards really work, and teens are even less informed. Excited at the prospect of spending money that is not “real,” teenagers sign up for credit cards without having a clue what an APR, minimum payment, or bill cycle is. Thus, even if the teenager intends to use the card responsibly, this can prove challenging when he/she does not possess the requisite knowledge to do so.

Safer Alternatives

Experts advise parents to steer their teenagers toward debit or prepaid cards as a first step into the world of financial responsibility. Debit cards are anchored to a bank account, which helps teenagers understand that they are indeed spending “real” money. Similarly, prepaid debt or gift cards are inherently self-limiting because, when the funds run out, the spending must cease until the card is refilled.

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