Teens wrestle with credit card debt
It's no secret that many college students are quickly sucked deep into credit card debt. U.S. college seniors, for instance, carried an average of $4,138 in plastic debt in 2008, according to the Wall Street Journal.
And, since roughly 70 per cent of Canadian students have a credit card, there’s no reason to think that things are any different here.But, thanks to new U.S. laws aimed at protecting young adults from debt, this may be changing.
Starting next February, anyone under 21 who’s looking for plastic will have to prove they have the means to repay their debts – i.e., a real job – or they'll have to get adults to co-sign for their cards.
In theory, the joint arrangement allows parents to keep a rein on the card's limit, with Junior responsible for paying the bill in full. There's also the option of making your teen an authorized user of your credit card. Of course, this still means careless parents could get stuck if their child rings up a large amount of debt and falls behind.
That’s why, if they have concerns about responsible spending habits, some parents are switching to pre-paid or secured – where the card's limit is usually equal to the teen's savings account balance – credit cards for their children instead.
Prepaid cards work much the same way as gift cards with parents loading money onto the card which then can be used at any merchant. Trouble is, when operating on this controlled basis, many young people still don't master the tricky nature of credit.
And the cards aren't cheap. The MuchMusic card, for instance, charges a $39.95 "membership and activation fee" for the first year and another $9.95 in year two. It's $1.50 to load more money and a $1 a throw to take cash out of an ATM.
Tell us: How do you handle teens and credit in your house?
By Gordon Powers, MSN Money
Posted by: Don | Oct 21, 2021 7:00:00 PM
We did not have this problem when teen's were not allowed to get credit cards until they were 18.
A simple solution...dont give credit cards to kids!
In my younger days we made at lot of mistakes with money. Quite often it took years to dig ourselves out of "stupid debt" we incurred before we knew better. Why do we have such a problem with having our childern learn the "life lessons we did?
You screwed it up...suck it up!
Posted by: Steve | Oct 21, 2021 7:29:16 PM
If credit card companies won't restrict the credit limits of their clients then the government will have to. Let's face it, with 30% APR's the credit companies have no incentive not to lend - it is an immensely profitable business even taking into account bad debts, fraud and the rest of it.
My solution would be goverment mandated maximum credit card interest rates tied to prime rates. That would limit the risks that credit card companies would be prepared to take and they would only lend money to those clients they think can actually pay it back as there would be less of a slush fund available to cover bad debt.
I have always been responsible with money - don't spend what I can't afford and always pay off credit card balances in full on the due date. I find it hard to understand anyone who feels they somehow have a god given right to spend money they have not earned with no concept of how they will ever pay it back. If you don't have the money to pay for something then you can't afford it and will have to wait and save up for it.
Total loans to any individual should not exceed a maximum after which all credit is cut-off until it is repaid. Interest payments as a percentage of income should be limited to a maximum after which again, the credit limit is cut-off. This would prevent people from spiralling into uncontrolled debt.
This may seem radical in this day and age but if you are an idiot who cannot control your spending then you deserve no less.
Posted by: Lily | Oct 22, 2021 9:45:32 AM
My kids (4) only use a credit card mine when they want to purchase a large item and don't have enough money as soon as the bill comes in they pay me. They work part time and I have explained to them that having a credit card is great to use in emergenices but you need to pay the balance off every month so that you don't fall into debt.
I have also taught them if you want to buy something and don't have enough money that you may need to save up a couple of pay cheques before making a purchase. It helps them understand the need to save for a rainy day and also keep emergency money. It doesn't also work but I think they get the basic concept. Both my boys have paid for driving lessons using my credit card and pay for their insurance premiums to drive our cars. One has saved enough money to get a used car.
Posted by: Tamara Holmes | Nov 2, 2021 6:18:15 AM
With the economy bruised by recession, the rules of the game have changed. A country that was always based on free trade enterprise has been forced to seek help from the government to guarantee the fiscal safety of large financial institutions. Companies no longer want bad debts cluttering the balance sheet. For this reason, these companies are prepared to settle debts for 30 to 40% of the original amount.
Posted by: Michelle Boudreau | Nov 6, 2021 1:42:36 AM
For the minors its become difficult to manage their debt with settlements processes , they need to be educated and trained in accordance .
Posted by: student credit cards | Jan 13, 2022 9:56:29 PM
ue to financial struggles a lot of students nowadays rely on loans and credit cards to support their education and personal expenses. A lot of financial institutions are taking advantage of it by giving a high interests and extra charges which add the burden of those young ones. That's why it is important to learn managing purchases and controlling expenses.
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