Are you thinking of getting your first credit card…lets fast-forward to next summer!

You have just returned from a fantastic road trip with friends. The fridge is empty so you stop by the grocery store to pick up dinner, you pull out the plastic and it is DECLINED. You have finally maxed-out your card at $3000, an accomplishment that you are not proud of. The challenge is going to be trying to figure out what it is you actually spent that credit on, and… how you are going to eat tonight.

After a sleepless night you decide to cut up that card and any others finding refuge in your wallet. The job you are working now only affords you $100 a month to help pay the card off. You begin a strict monthly payment plan that pains you.

The unfortunate truth is this! With an Annual Interest Rate of 18% it will take 2 years and payments totaling $3600 to reach that elusive ZERO balance.

Credit sounds fun and it makes you feel all grown up having that card in your wallet. But, it can be very costly if abused. If you plan on accessing some form of credit there are several points to consider since misuse can seem like eternity to correct.

The Good

Understand the costs of using credit, learn how to manage it and stick to one credit card.

• Convenient, it’s accepted almost everywhere.
• Secure, you don’t have to carry pocket full-o-cash.
• Perks, reward programs and insurance coverage on purchases.
• Paying balances off monthly contributes to a strong credit rating.

The Bad

Just because your approved doesn’t mean you can afford it.

• Control impulse buying, the average person spends twice as much with a credit card than if buying the same item with cash.
• Don’t be lured by teaser rates from credit companies as they can quickly climb to over 20%, a crime in itself.
• Only charge what you can afford, if you find you can’t afford the payments now the downward spiral is about to begin and your credit rating will suffer.

The Ugly

Don’t over extend yourself with too many cards.

• The dangers of carrying a wallet full of maxed-out cards can be a reality.
• Don’t rely on the plastic. If you can’t pay off 1, how can you pay off 2, 3, ….
• It can take 10 years to clean a dirty credit rating. Sorry, you are declined…no mortgage to purchase a home, no car loan, no personal loan to pay for that dream vacation, or the possibility of a lost job opportunity if you are seen as a possible security risk.
  

More info in the Going to School Area: What is an RESP?

Check out Nelson's Youth Employment Resource Centre web site for school and education links