I can still remember the day my parents gave me my very first credit card. I was still in High School, and they made me a user on their credit card. Since I had a part-time job I earned money every week, and they told me that I was free to use the credit card as much as I wanted, as long as I paid off my portion of the charges by month-end when they were due. My parents never were, and still aren’t the type to carry credit card debt; any purchases put on the card are paid off as soon as they receive the bill.
Looking back, this was a huge amount of freedom which they gave me, but it also helped to teach me a lesson in very practical terms. They showed me that they trusted me enough to be a responsible young adult, and I, of course wanted to prove to them that I was one. Every time I used the credit card I wrote it down in my journal, and at the end of the month I gave them the cash to pay off my purchases. It was a win-win for both of us and I learned very quickly the concept of “don’t’ spend money you don’t have.” Though I was still young, I envisioned replicating this same scenarios with my own children someday.
Then I got to college, and THAT was a different story.
My part-time job went away and I no longer had discretionary income coming in weekly. My parents sent me money to cover living expenses and the sort, but that was to buy food, books and other items that college students needed. It certainly wasn’t enough to keep shopping or going out, and there were things I wanted. Not that I needed, but wanted. At first I used my credit card for small things, like dinner out or some new clothes. Somehow I scrambled and managed to make the payment at the end of the month. But then it started getting bigger and bigger until one month I ended up spending a few hundred dollars on cosmetics at the department store, and when the bill came due, I couldn’t pay it.
My dad could have just paid it off, or asked me to pay it in installments, but I don’t know if that would have had a great impact. Instead, he made me gather up everything that I bought, marched me (and the items) back to the store and told the clerk that I purchased them without having the means to pay for it, and that they needed to be returned. I was mortified and horribly embarrassed, but it was the last time I used their credit card for a frivolous purchase.
Now that I am a parent, I plan to do the same with my son. I know that credit card companies actively pursue college kids on campus, but I plan to make him an authorized purchaser on my credit card long before then. I want him to understand cause and effect, how to responsibly use credit and be able to live by the motto – “Don’t Spend Money You Don’t Have!” Then, when he chooses to establish his own credit, I will have hopefully instilled good habits!