We are seeing more and more people fall into the trap of credit card debt because they were not adequately educated about the dangers.
Money management does not come with an instruction manual. Sometimes it becomes a trial by error type of scenario unfortunately once the lesson has been learned you can be totally consumed by debt never to see the light of day.
To help prevent these types of situations every high school student should have to attend consumer credit counseling or a debt counseling service prior to graduation and before they apply for a credit card.
This would be similar to counseling programs that someone who is deep in debt attends.
If we can help our youth understand the dangers of taking on too much debt at an early age then we can help pave the way for a successful transition into the credit world.
When students understand the pitfalls and hear about some the actual stories of people who fell into this trap they will be more likely to be on guard against this type of activity.
Chances are they will not abuse credit and will actually look for ways to keep their credit reports in good standing.
Students should be cautioned about only using credit cards for emergency purposes. As soon as you charge something and upon receiving your bill you utter to yourself, after seeing the minimum payment, “oh I can afford to pay that.” This is the starting point of falling into the trap. Credit card companies want you to pay the minimum payment only so that they can keep you as a customer and continue to earn finance charges as long as your balance is outstanding.
A credit card company, according to the terms and agreements, can increase your credit card rate at any time. The must notify you in advance prior to the change. This helps them to earn more money in finance charges and helps you pay more in finance charges.
Other things that students should be cautioned about are the various fees they can be subjected to such as late fees, over the limit fees, cash advance fees, and ATM fees.
If your credit file has late payments it will make your pay more when you get ready to buy a house or an automobile loan. Late payments will lower your credit score
Students should also be told about the dangers of fees associated with checking accounts.
There are minimum balance fees you can incur if your balance is not at a certain level.
If you have a zero balance in your checking account and a check is cashed you will receive a return check fee and if you use your debit/credit card each transaction will come with a fee. This can become quite costly.
If all students attend a consumer credit counseling class that covers every facet of consumer credit then we will see a decline in the number of bankruptcy petitions filed.
A program of this sort gives students the ability to perform tasks such as balancing a check book, establishing a family budget, manage debt, and how to avoid excessive fees by shopping around for the most cost effective products and services.