Daily Dupaco

Tuesday, August 31, 2010

Prep young adults for onslaught of credit card offers

The credit card applications started appearing in the mail one week after her daughter's eighteenth birthday. The sheer number of offers surprised--and worried--the mother.

"I know at eighteen they are ready to tackle the world, but how can she begin to understand the importance of building a good credit history?" she asked.

Used responsibly, credit cards can be helpful in an emergency and for establishing a credit history, according to Matt Dodds, senior vice president of consumer lending at Dupaco Community Credit Union.

Paying debts on time, including credit card bills, contributes to building good credit.

"If you don't honor your payment agreements, your credit rating can be damaged and you may not be able to get credit again when you need it," he said.

A poor credit history can affect an individual's ability to rent an apartment, get a job, or buy a car or house.

"People with poor credit also must pay higher interest rates for loans," Dodds said. "The negative information stays on your credit record even if the bill is later paid."

Before making a purchase using a credit card, Dodds advises people to ask themselves:
  • Do I really need this item now?
  • Do I have enough in my budget this month to pay off the entire purchase?
  • If I use a credit card, what additional fees or interest will I pay if I don't pay off the entire balance?
  • What might I have to give up in order to buy this?
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