Persuasive Essay On Credit Cards

Should Teens and College Students Have Credit Cards?

Good Credit Habits Start at a Young Age

By Jeremy Vohwinkle

Updated February 23, 2018

Credit card debt is a major problem, and every year millions of people find themselves in over their head. Interest rates rise, payments get missed, and credit scores are trashed. While credit card debt can be financially devastating, credit plays an important role in our lives. Want to buy a house? Unless you have a lot of money in the bank to pay cash, you’ll need credit. In some cases, even renting an apartment, obtaining insurance, or applying for a job may require your credit history to be pulled.

Without credit, it can make even some basic things more difficult.

Young People and Debt

Once someone turns 18 and can qualify for their own credit cards and loans, they become a prime target for lenders. Credit card companies know that young adults are eager to begin their adult lives, and this often happens when they go off to college. So, many college campuses are filled with banks and credit card vendors giving away free gifts for signing up, and otherwise making it very easy to do.

The real problem is that for many of these students, this will be the first credit card they encounter. They pay little attention to interest rates, terms, and card features. The card they choose may set them up for failure right from the start.

Also, many young people are not adequately educated about credit cards and debt. They may know that you have to pay the money back, but they may not be prepared to understand the effect of high-interest rates,  minimum payments, and the devastating effect that late payments can cause.

And when most young people have relatively low-paying, or part-time jobs, it can become difficult to keep up with credit card payments if they get out of control.

Why Most Students Need Credit

With all of the negative consequences of credit card debt, the fact is that most students need, or should at least have a credit card.

If for any reason at all, it’s to establish a credit history. You need credit to build a credit score, so obtaining a credit card at a young age is an easy way to do this. Also, one of the important factors of your FICO score is the length of credit history. So, the sooner you establish a line of credit, the longer your credit history will be when it comes time to take out a serious loan such as buying a house.

Not only that but credit cards are great for an emergency. Most students won’t have a significant emergency fund of cash sitting at the bank, so having the ability to come up with money in the event of an emergency is important. As a parent, you probably don’t want to think about your son or daughter being stranded if their car breaks down, or coming up with money if they need to fly home for an emergency, so a credit card can provide a good safety net.

It’s Still Up to the Parents

If you want your child to have good spending habits and resist the temptation that can come with having a credit card, it’s up to you to educate them. They need to know the benefits of having a card, and the devastating consequences that can come from misuse.

As a parent, you need to sit down with your son or daughter before they head off on their own.

Discuss the reasons why it’s important to have a credit card and credit history. Also, you should help them find a good credit card, so they don’t end up signing up for the first one they come across. Once they obtain a card, make a purchase and walk them through the process of making the monthly payment. Either by check or electronically so they know what to expect and are familiar with the process.

Finally, go over the ground rules. Explain exactly what the credit card should be used for, and who is responsible for the payments. You want your child to use this tool responsibly, so it should be clear that they need to keep up with the payments.

If you take the time to educate your child at a young age so they can establish credit in a responsible manner, they will be in a position to hit the ground running with a solid credit history and have established ​sound financial habits going forward.​

Credit cards are good. Seriously. I think just about everyone should have at least one credit card to help build credit, use for emergencies, fraud protection, and a host of other benefits. But I know that not everyone agrees with me, and many people think that credit cards are bad.

When you’re dealing with credit cards, there are several different things that you should know. It’s important that you understand all of the advantages and disadvantages that you should be aware of when you’re handling your finances. Your finances are one of the most important areas of your life, and it’s important that you’re getting the most out of it.

A reader who has had past difficulties with credit card debt challenged me to stop using credit cards:

Ryan, I challenge you to go three months without using your credit cards! Put the $1000 emergency fund in place, freeze your credit cards (better yet cut them up!), and go the entire first quarter of the fiscal year without the plastic.

She believes credit cards are bad and that no one should use them. She has had problems with debt, so I understand where she is coming from. But even though she doesn’t love credit cards, I think her statement takes it just a little too far. Not everyone is in debt, and many people gain benefits from their credit cards.

This article is going to explore the different advantages of credit cards and some of the different ways that you can use them. Hopefully, this post will answer any questions that you have and give you some insight into the world of credit cards. I know that everybody is different, which means that not everyone is going to need a credit card, but I’m speaking for the majority of people.

10 Benefits of Using Credit Cards:

1. Build credit history: Charging small amounts and paying them off is a great way to establish credit history. Without credit history, it can be more difficult to get loans (including good loans such as student loans or a mortgage), secure insurance, or even land a job. If you are able to secure a loan without any credit history, your loan rate may be higher as a result.

Having a good credit history can help save you thousands of dollars on all of the major loans in your life. For example, when you apply for a mortgage loan, the difference in an applicant with a good credit history versus a bad history could be thousands of dollars. Holding a credit card, and making timely payments is one of the easiest ways that you can build your credit history.

2. Emergency source of funds: I mean for a real emergency. A real emergency fund is always best, but not everyone has $1000 cash to buy emergency airline tickets, make car repairs, deal with a natural disaster, etc. And in my opinion, paying 15% interest is much better than taking out a payday loan in an emergency. Some payday loans have interest rates near 1000% if left for an entire year.

As we mentioned, having your emergency fund in cash in a savings account is a much better idea, but if you don’t have that available, a credit card can be one of the best ways that you can pay for the bills that pop up. If something were to break or some emergency pop up, it can be difficult to pay for those bills, but that’s where your credit card will come in. It will give you and your family the money that they need.

3. Fraud / Theft Protection: If your card is lost or stolen, you are only responsible for the first $50 in unauthorized charges. Fraud protection for debit is similar, but only if you notify your financial institution within 2 days. If you wait longer than 2 days, you can be liable for up to $500 on your debit account. Fraud and theft protection is non-existent for cash.

4. Disputed charges: When you dispute a charge on your credit card, most credit card companies remove the charge until the dispute is resolved. With a debit card, the money will not be returned unless you can prove the dispute in your favor. With cash, the money is usually gone.

5. Rewards: Many credit cards offer rewards including cash back, airline miles, discounts, rebates, gift cards and many others. Most of these rewards are designed to get people hooked into using the cards or spending more than they would otherwise, but used properly, rewards points can earn you a lot of money. Some credit cards offer a sign up bonus of several hundred dollars – just for opening an account and meeting a minimum spending requirement.

6. Convenience: I don’t like to carry large amounts of cash with me. If you lose it, it’s gone. If it’s stolen, it’s gone. Credit cards are small, convenient, and carry better consumer protections. They are also convenient to use to buy things on-line, or to buy large dollar items. Another, convenience is travel. I will be going on a cruise next week and if I use my credit cards I won’t need to exchange as much currency. Some credit cards don’t even charge a foreign transaction fee.

7. Car rentals: Some car rental agencies will not allow you to rent a car if you do not have a credit card. Some may allow you to rent a car with a debit card, but may lock up a substantial amount of money in your account until you return the car. You won’t be able to use those funds during that time. Many credit cards also provide additional liability insurance when you rent a car. Debit cards? Not so much.

8. Extended warranties: Many credit card companies provide extended warranties on items you purchase with their card. In some cases, the manufacturer’s warranties are doubled. That’s not a bad feature!

9. Short term loan: Credit cards usually have a grace period, after which your payment is due. This can be several weeks, which allows you to earn interest on purchases you have already made. While this may not be a big deal for a hundred dollars, if you charge a thousand dollars every month and add it up over the course of a year, you can actually earn some decent money with this. With cash or debit cards, the money is immediately removed from your account and you do not earn any interest on it.

10. Budgeting tools: Most credit card companies provide detailed transaction logs which are easily downloaded into Quicken, Mint.com, or other free money management tools. This makes budgeting much easier to track and plan. Yes, it can be done with cash, but it is much more labor intensive. And time, as they say, is money. 😉

Honorable Mention (NOT FOR EVERYONE!!!)

  • Credit card arbitrage: (Note:this is only for experienced credit card users and not recommended unless you completely understand what you are doing, and are responsible enough to follow through with it). Credit card arbitrage entails taking a cash advance on an introductory 0% interest credit card offer, investing the money in a bank account to earn interest, and paying minimum payments until right before interest kicks in, then paying the card in full. Some people are able to do this to the point of having $100,000 in credit card debt, but the debt is actually cash which is earning them money in the bank. Use this calculator to determine how much you could earn from 0% balance transfers.

Credit Cards Should be Paid in Full Each Month

To get the most out of the benefits listed above, the credit card holder needs to pay the entire balance in full every month. When used properly, credit cards can be a very useful addition to someone’s life. When they are not used properly, credit cards can be BAD! In fact, I am an advocate of not using credit cards if that is not the best financial decision for your situation. Even though they do not have as many benefits as credit cards, I also think using debit cards can be a great way to make financial transactions. Always do your research, and please be financially responsible.

To Finish off My Public Challenge:

The 10 reasons I listed above are benefits for me because I do not carry a credit card balance (I do not practice the “honorable mention” benefit, but it is worth noting). My wife and I have been blessed to have been able to put together a sufficient emergency fund, and we are able to use our credit cards for our purchases and pay them off in full every month. I won’t stop using my credit cards because for me, it is not a problem. In fact, doing so would cost me money.

In my opinion, everyone can benefit from having a credit card if they use it responsibly. The key here is responsible use. If you know you can’t handle it, or don’t think you can, then don’t do it.

If you have any more questions about credit cards or how you can use them, don’t hesitate to contact me today. I would be happy to answer those questions and ensure that you’re getting the most out of your finances. I know that navigating the financial waters isn’t easy, but that’s why I’m here to help. There are dozens and dozens of credit cards on the market, which means that there is one that will work well for you.

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