Listening to wisdom from generations before us can be challenging, and unfortunately, it is human nature to be rebellious. When we get to the age of 13 we think we are adults, and at 18 that we have mastered the mysteries of life. It is not until you reach your mid 30’s that you think back and wish you had listened to the advice that your parents had given you. What if there were certain things that they didn’t tell you, like how to manage your credit? A lot of parents don’t teach their children how to be financially responsible and this can be detrimental later on in life. Here are 3 things your parents should have taught you about credit cards.
A lot of parents don’t teach their children how to be financially responsible and this can be detrimental later on in life.
Lesson 1: Unexpected Fees
Interest charges are not the only fees you should expect to pay on your credit card. These include: balance transfer, cash advance, foreign transaction and annual fees. Before you apply for a credit card make sure that you read the terms and conditions to find out what fees you will have to pay. Also, some credit cards have lower fees than others, compare credit cards and see what will be financially viable for you.
Lesson 2: Interest is Not Cheap
When you carry a balance on your credit card it means that you will end up paying more interest. Every purchase will incur interest from the day of purchase until it is paid off. In other words, when you buy something, the price that is written on the receipt is not the price that you actually pay when you calculate the interest charges. Some credit cards have a higher interest rate than others; therefore search for the best credit card deals before applying for one.
Lesson 3: You Will Still be Paying Off Credit Card Debt After University
The majority of students in Australia get through university on credit. When cash gets tight, they live off credit cards and bank overdrafts. What people fail to realise is that a job is not guaranteed after university, you are not going to walk off the podium and walk into a full time position. You are going to be unemployed while you are looking for work. During this time, your credit card bill isn’t going to stop coming. This is how the debt cycle begins, you end up borrowing more to pay back and get into more debt.
When it comes to credit card use in university, use it for emergencies only and pay it back straight away so that the only debt you have when you graduate is your HECs debt or student loan.
As long as credit cards continue to exist, people are always going to spend money that they don’t have. If your parents didn’t give you the pep talk on credit, you are going to have to learn by experience and that often involves getting into debt.
Compare credit cards before applying to avoid high interest rates and other fees. You should also pay your balance off in full every month.
Got any other tips your parents should have taught you about credit cards? Let us know in the comments section.