Wednesday, July 16, 2008

I've Been Ignoring my Young-Adult Readers. No More

Over the weekend I had an opportunity to speak with a young adult about credit issues. During the course of my discussion, a few things became clear. Not only did I realize that young adults don’t know much about credit, I also realized that my columns have largely been written for a different group of readers. Indeed, at the end of the day, I’ve been ignoring the young-adult population here at I told the kid about my realization and said that I would write a column for him – and every other young adult who is similarly situated. So, if you’re out there, Michael, this blog entry is for you.

Michael, soon you’ll be applying for your very first credit card. Because you’re just now starting college, your first credit card offer will likely be pitched to you from some representative peddling a credit card on campus. Beware.

That first credit card probably won’t be difficult to get. But do note: even though you won't have a credit history to rely on, don't sell yourself short by applying with credit card companies that cater to customers with poor credit. Indeed, there is a significant difference between someone who has poor credit and a young adult who doesn't have any credit. As such, stick with mainstream card companies such as Chase, Citibank, Bank of America, American Express and Discover. Chase and Citibank seem to be more lenient, while Bank of America is hit or miss. American Express and Discover, meanwhile, seem to be more difficult nuts to crack.

Though you'll likely get approved for a student card, with a limit ranging from $300 to $500, don't be tempted to run out and buy a bunch of things that you can’t afford to pay off now. You’ll likely reason that you’ll pay the card over time – while being assessed a little bit of interest each month. Credit card companies would love nothing more than for you to keep balances month after month. They’d love for you to pay interest each and every month. Don’t fall into that trap.

Instead, use the card sparingly. Don’t allow balances to sit on your card from month to month. Never get into the habit of paying interest to the credit card companies. Paying in full is the mantra that you want to live by. The goal for you is to parlay this first credit card into something more substantial down the road. This first card, then, is simply a means to an end. Use it for the tool that it is. By not using all of your available credit – and by paying your balances in full each month – you’ll be showing the credit card company that you are responsible. The reputation that you build with the card company today will pay off in spades tomorrow.

Your good reputation will be used to get more credit cards – with your first creditor as well different creditors – in the future. What’s more, you’ll likely need strong credit to land your first job (and your second job, and your third job, and your…). Employers are increasingly pulling credit reports to vet would-be employees. Additionally, if you decide to attend graduate school after college, you may have a need for a private loan to help finance part of that education. If that’s the case, you’ll need good credit to land that loan. Beyond that, there will be mortgages and auto loans. In other words, the need for good credit is never ending. A person who doesn't understand or appreciate how important good credit will be in the future is an idiot, indeed.

Have no fear, though. Your good credit is going to be a valuable asset that works for you. You’re not going to be one of those kids who fluffs off his financial responsibilities. You’re not going to be the roommate in college who has all of the maxed-out credit cards. You’re not going to be the kid who pays a ton of interest to the credit card companies every month. You’re not going to be that kid who wants to go to medical school but can’t go because he can’t get the extra financing that he needs to make ends meet. You’re not going to be that kid who has a bunch of late payments strewn about his credit report. You’re not going to be that kid who misses out on opportunities.

How do I know all of these things? I know these things because you were willing to sit with me for nearly two hours. You were willing to listen to me even as I waxed philosophical about the need for strong credit. Even though you had better things to do (on a weekend no less), you asked me tons of questions. Most of all, I know you’ll succeed because most kids your age are interested in other, more exciting topics. They’re sure as heck not interested – especially at your age – in credit matters.

But that’s OK. We’ll let those other kids give you an update on the Real World or the latest edition of Viva La Bam. Meanwhile, you’ll be the kid that everyone comes to for financial advice. What’s more, you’ll be the guy who gets the highest credit card limits, gets the best loan terms, gets the first job, and never misses out on financial opportunities.

You’re well on your way, Michael. Best of all, you’ve already got a head start on the rest of your peers.

Carry on.


The Atkinson Asylum said...

This is a FANTASTIC entry. I wish someone had told me these things 12 years ago when I was in college. I started off wrong and paid for it for years. I still have some bad habits I am trying to break, although, I am much better than I used to be. I am going to direct all my "new to credit" friends to this entry. said...

Love the screen name, Atkinson.

Glad that you enjoyed this blog entry. This was one of the earlier stories I wrote for this site. I enjoyed spending my time with Michael that day. Wish more kids were like him. Alas, they're not.

Welcome to the site, Atkinson Asylum. And thanks for posting.

Come back again.

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