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Level 1

Credit card advice for parents

Just wanted to pass along a story, in case anyone else can benefit from it.


I got my first credit card when I was 16 years old (my father co-signed on it, of course). The deal was, use the credit card to buy gas for the car and he will help me pay it off at the end of the month. Sort of an allowance, while teaching me how to use a credit card responsibly.


This taught me, from day one the importance of paying off a credit card every month. I meet so many people that learned this lesson the hard way, only after moving away from home, maxing out cards, and trying to dig their way out of the worst kind of debt there is.


Please let me know if you have similar stories that have prevented you from learning financial lessons "the hard way".


Thanks again, Dad!

2 Replies
Level 15

Credit card advice for parents

Back in 2010 when my credit card was about to expire, I received a replacement in the mail that had to be activated before I could use it. I decided to not activate it, until the current balance (about $5K) was paid off. Had it paid off in 5-6 months. Then realizing that I had not missed having that credit card for the 5--6 months it took me to pay it off, I continued making those credit card payments to *myself*, by putting the payments in a savings account on which I had a check/debit card that could be used just like a credit card. In no time at all, I had several thousand dollars in that account, and cut up the credit card I had received, without ever activating it.

Now, I use the check/debit card the same way I use a credit card. The only difference is, I can't spend money if it's not in the account. The card will decline. Therefore, I can't spend money that I don't have. Additionally, instead of me paying 14-21% interest to the credit card issuer, the bank pays me interest on the money I don't spend. Yeah, it's less than 1% right now. But it's 1% I wouldn't have otherwise. This also makes me more conscious of what I buy. I question if I really need it, and if not, I don't buy it. It's a lot harder to spend money you already have, than it is to spend money before you get it. I like that.

Now that was 8 years ago. As it stands now, I refer to that savings account as my emergency account. I have built it up to a point now, where I have 5-6 months worth of recurring monthly living expenses in it. A few years ago having that emergency fund came in handy when my truck needed $1500 worth of repairs. Because of that account, I did not have a "financial crisis" or emergency. Instead, it was more like a financial inconvenience that did not impact my standard of living or way of life one single bit. WHen I went to pay for that new transmission, all I asked was "chip reader or swipe?" and I was on my way.

Level 2

Credit card advice for parents

Your parents did it well!

My parents ingrained a strong work ethic in us and encouraged us to stay away from depending on credit cards. So, at 25 years old, I had paid for college, a car, rent and all of my other bills in cash. I was ready to buy a home, but couldn’t because I had NO established credit. I spent 2 years building credit just to be approved for a home loan.

DEFINITELY educate your kids about the healthy way to use credit. It’s sad that we have to be indebted to a card or bank in order to make large purchases, but that’s the world we live in!
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