Credit Cards and Young People: Friends or Foes?

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The subject of credit card use by young adults is much talked about online and offline, in magazine and internet articles. There are supporters and opponents of issuing plastics to young people among credit consumers and financial experts. However, many of those hair-raising tales about graduates that collect enormous debts are just boogieman stories. The statistics shows that young people became more reasonable in credit card management and most of them do not have loads of debts.

A recent opinion poll conducted among college students revealed that 92% of young adults realize that damage credit history and low credit score could have a negative effect on their future financial standing and cause problems with qualifying for loans.

Over 45% of the questioned students told that they have their spending under control and try to be responsible cardholders. But about 30% of the respondents admitted that they do not think much about debts and penalty fees swiping their plastics in order to pay for another CD, T-shirt, shoes, etc. Especially when it comes to throwing a party, this part of students acts like big spenders.

Some parents out of fear for their precious clueless student kids try to prevent them from using plastics. Parents want their children to live in clover. Far not all parents can tell with confidence that their 18-year-old-kid is mature and experienced enough to manage his or her finances right. And irresponsible credit card management will lead to damaged credit. Damaging credit, having barely established it does not do any good.

To prevent it many parents offer their kids financing alternatives, instead of letting them apply for new credit cards, for student card deals, for instance. Parents co-sign children to their plastics, make them authorized users or offer to get a debit card.

But on the other hand, both, parents and their student kids realize the importance of good credit score and credit history for children's future financial wellbeing. When a person decides to apply for a mortgage or auto loan, he/she needs to have high credit rating. The higher score is, the better interest rate a customer gets. The same with plastics a customer with good payment records and high FICO score is eligible for best credit cards.

So, sooner or later a youngster will have to start building credit, if he/she wants to live a financially independent and well-endowed life. Nobody's perfect, and everybody makes mistakes. But a little experience and learning the basics of money management and budget planning will help establish strong credit and not to end up with bad credit.

There are a few simple student credit card management tips for young adults to take right steps at the beginning of their independent financial life.

• Keep your spending under control. Too abstract? In fact this means that you are to use plastic when you actually need it, i.e. buying some necessary things. Movie tickets, burgers at McDonald's, soda do not count.
• Borrow as much plastic money as you are sure you will be able to pay back on a due date.
• Make more than minimum payments, this way you will save on interest and pay down your balance faster.

• Keep your credit utilization ratio - the amount of credit you use, which is calculated as your total credit available divided by your total debt - below 50% - 40%. This will make your credit score go up.