3 Lessons My Parents Never Taught Me About Credit Cards

This is a guest post by Kris Bickell. Kris is the owner of Debt-Tips.com, a site developed to share the lessons he learned about getting out of debt. Check out his debt reduction calculator and other tips that will help you pay off your credit card debt.

To start off, I’ll admit it, I’m no kid. So don’t think I’m blaming my parents for any money troubles I’ve had over the years. But if they had taught me these three lessons, then maybe life would have been a little easier.

Of course, there’s no guarantee I would have listened to any advice from my parents, but that’s another story.

A friend of mine used to say “too bad credit cards don’t come with instructions…”

What I Wish I Learned About Credit Cards
While most people know how credit cards work, I don’t think they truly understand the incredible impact they can have if you don’t know how to use them properly.

So for those of you who are new to adult life, or if you’ve had money problems and are starting over, or if you’re just stuck in debt and looking for some help digging out of a big financial hole, maybe these lessons can help you out a bit. I know they would have helped me.

So, here are the 3 lessons my parents never taught me about credit cards:

1. Credit cards are way too easy to get. I got my first one while still in college – American Express. Right on the front it says “Member since 1986″ (I told you I wasn’t a kid any more). By the way, what a great marketing tool because who wants to get rid of a credit card with a status symbol like that!

   Sounds cool, right? Actually it was a big mistake. I was a financial “newbie” way back then – with no job, no career, and no way to pay back what I charged on the card. Of course, with AMEX you must pay the entire balance each month, so that part wasn’t so bad. But what was crazy was the message that “Hey, getting credit cards is so easy you can get them even if you don’t have any income!”

   And then over the years you get a few more. Start buying things you really can’t afford. Then start making partial payments. And then you start paying high interest fees each month, so the debt builds up higher even when you don’t charge anything!

   See, these things shouldn’t be so easy to get. Wish my parents had warned me!!! Oh well, on to lesson #2:

2. Credit card companies won’t warn you – or stop you – or help you – when you’re getting in way too deep! I always figured that since I was such a valuable customer that the banks would want to do whatever it takes to keep me.

   Way off base on that thinking! Sure, as long as I kept paying, they would keep me around. But as soon as you’re late on a payment — ZING! — your interest rate goes way up. And if you need to skip a month, well, forget that idea. And if you get to the point of needing real help… then they tell you to call someone else, of course. Or have your card frozen. And you get hammered with late fees, over-the-limit fees, and before you know it your debt is growing by leaps and bounds!

   I know, it’s my fault for getting into financial trouble, not theirs. And the rules are in the terms & conditions. But I was just asking for a little warning, or a little help.

   And I was forced to learn the hard way that I was all alone and it was way too late. My bad, now on to lesson #3:

3. Credit cards should really be used like debit cards. To be paid off in full every month. And you should ignore the credit limit, and instead pay attention to the amount in your checking or savings account.

   Sounds a little idealistic for many people, I know. And not realistic when you get stuck with a huge medical bill or car repair bill, and need help paying it.

   But in the long run, if you don’t use your credit card like a debit card, and you charge more than you can afford, chances are pretty good you’ll get stuck in the good old “debt trap”, where the balance, and fees, and payments all keep going up and up and up …

   And more importantly, you figure out just how hard it is to get out! Just like the banks want (see Lesson #2).

So there you have it. If only my parents had taught me these lessons, I would have done like any teenager and listened very carefully to their words of wisdom, followed their advice every step along the way, and never would have had to deal with debt.

Well, OK, to be honest I probably wouldn’t have listened to most of what they had to say. But when the money issues started, at least I would have heard their words of advice buzzing somewhere in the back of my mind. And avoided some of the worst money issues I dealt with.

Hopefully, you’ll learn a tip or two from these lessons and avoid some of your own credit card disasters!

Simon’s Note: With the new Credit CARD Act legislation, credit cards are much less accessible by young adults under 21 years of age. But afterwards, it is still easy get credit cards and fall into tremendous debt.

(Photo credit: fromcolettewithlove)

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