Credit cards don’t cause debt, people do

I have used credit cards my whole life. I have never carried a balance except by accident (when I did not receive a statement and forgot to ask why, for example). I think education at an early age is key to avoiding the mentality of thinking of credit as free money and instead thinking of it as currency.

My earliest education in credit cards came in high school, when my parents gave me two credit cards: one was a card for a gas company (I seem to remember it was Exxon) and the other was a vanilla Visa card. This was a long time before the days of cash back or rewards. The gas card was more or less worthless for anything except, obviously, buying gas. The Visa was generally for routine expenses that I might need.

You may already be wondering what kind of pampered rich kid gets two credit cards, paid for by his parents. I did not have a job in high school. My parents always told me that my job was studying. We were lucky enough, of course, that we did not need the income I could have provided, but we certainly were not rich, either. We were an average middle class family.

So rather than giving me cash, they gave me a credit card. Giving me a credit card resulted in two different things happening, one intended, one unintended. First, I learned that you could use a Visa to buy just about anything short of Cokes from a vending machine – at least not in the mid-80s. I learned to keep track of my spending and to be able to account for it. I am not sure my parents meant for it to happen this way, but one month I bought several albums (the 80s, people) on the card and my parents asked why that was necessary. Not having an answer, I agreed to pay for music on my own in the future. Since I had no job, that limited my purchases to gift money for the most part.

The second result was not intended but I think it has helped me a lot through the years. It taught me to view credit cards as currency – simply another way to pay for things. Credit cards just happened to be more convenient for me and I learned that you could use them just like cash, but like cash, credit cards were not a bottomless pit. At the end of the month, reckoning would come in the form of Mom and Dad. They were not offering me interest. They were offering me continued responsible use of the card, or no card.

I think this is different from many people’s first experience with a credit card. They get one in college and think that there is simply no way to pay more than the minimum – but hey, they will get a job once they are out of college and pay for it then. The trouble is that the psychological damage is done. I do not blame people for this thought process one bit. The credit card companies want you to think that way. Their existence depends on you thinking that way. They offer everyone cash back and insane rewards to spur you on to spend more than you are able to repay.

The simple fact, however, is that once you view a credit card as currency it is safe to use them. I try to use my Amex constantly. The rewards points are great, and Bubelah and I have used them for flights, hotels, rental cars and even gift certificates. I charge my morning coffee. I have learned to charge pocket change purchases without embarrassment, because with cash I get nothing. With a credit card, I get something back.

So if you have children who are approaching their teenage years, I would highly recommend giving them a low-threshold Visa to practice responsibility. If they have a job, have the statement sent directly to you, and do not tell them the minimum amount due. Tell them to pay the full amount. If they cannot pay, take the card away until your child pays it off through chores, a job, whatever. If your child does not have a job, tell them that they have a set amount they can spend on necessities each month – food, school supplies, maybe the odd meal away from home with friends. As soon as they go over the limit, yank the card.

I think if more people had this experience as teenagers, they might avoid trouble as adults. Most parents are simply afraid to expose their children to the credit card beast. The unfortunate result is that most people first experience credit cards when they are on their own, and they never learn responsible spending. That is good news for the credit card companies, but bad news for everyone else.

Tags: children, family, income, life, money