As a teen, you have more purchasing power than you did as a child. You’re getting an allowance or working at a job. You should have a bank account, both checking and savings, and it’s likely you have a credit card – or will be getting one soon. There’s so much you can do with your money, which comes with a lot of responsibility. Whether you’re saving up for a video game, a car, or college, learning how to manage your finances is an important skill.
Kids often grow up thinking that credit cards supply endless amounts of money. It seems like your parents use their card and the purchase is done! As you get older, you realize you have a limited amount of money, and it comes from your allowance and/or job. Credit cards have different limits depending on your credit history. For example, when you first get one, your limit might be $500. As you pay your full bill on time every month, your limit will increase. It could be automatic, but if not, you’ll have to find the link on their website to ask the company to look over your account and decide.
Paying on time is very important. You will often see instructions on your bill including the words “Minimum due: $25” or something to that effect. While it may seem like only having to pay $25 during a month you owe $200 is great, especially if your checking account balance is low, you should aim to pay that $200 before the due date. If you don’t, you will be charged interest on anything not paid for that month. Over time, the interest can add up, and credit cards have notoriously high interest rates. A book you may have bought for $10 could end up costing you $100 over time, depending on how long it takes for you to pay off your credit card bill. This can lead to a long cycle of debt that is hard to escape from.
Credit card rewards programs are also likely to only benefit those who don’t carry a balance. So when you get a credit card, make sure to get the most for your money. Start getting in the habit before you sign up, and always have enough money to pay for what you want, rather than having your parents or someone else purchase it for you. Good habits now will help you manage your money well in the future.