Credit cards can help the owner to raise his credit score to buy a house or a car. But bonus points programs are also likely to plunge the young consumers in the depths of debt.
“The biggest mistake young people make is to use their credit card to improve their lifestyle. They spend more than they earn, and they pay 18% interest on it. The effects are still being felt five to seven years after the use of the card. ”
Observers have noted that more young held credit cards than ever before and it established a dangerous precedent. Sometimes some parents sign their children while they have not yet reached adulthood and let them unravel in the world of commerce and it’s not a good idea to get ways to build credit.
Finance experts also argue that the bad habits in adolescence may persist into adulthood.
“Some people feel that if they have $ 500 in credit, they have $ 500 in cash. This is not the case.
In a short time, “apparently reasonable purchases can become very expensive” if unpaid bills are driving up interest.
It’s recommended to young users to avoid cards promising great rewards such as travel bonuses or gifts, because they often require additional annual fee. It is also believed that these cards are best suited for experienced users, since they may increase the risk of overspending.
It’s also noted that a request rejected for a credit card affect its credit rating. So avoid claiming a card that you do not need or you may be denied.
Have multiple credit cards can also affect when the time comes to apply for a loan to buy a house or a vehicle. “The bank looks at your credit line of $ 5,000 or $ 10,000 as the money you’ve spent”.
It would be wise to prohibit additional cards that you do not need because it’s not one of the ways to build credit, including those offered by retail stores, which usually have very high interest rate in exchange for low discounts.