Almost every youth has gone through the same experience. The first time they hold a credit card in their hand and make a purchase with it can be a very freeing time. However, learning how to use this plastic in a smart manner takes a lot of training. No one understands how to control credit spending naturally.
Many parents won't be surprised by the results of a recent survey. Young Canadians aged 18 to 34 find themselves using credit cards very actively. This alone is fine. The part that is disconcerting is that many are not doing so thoughtfully or wisely.
It was found that over half of the respondents were not making full payments of their credit card balances at the end of every month. About 40% of the respondents were only making the minimum payments and about 23% said they had missed at least one payment due to insufficient funds.
Young People Spending
The Generation Y consumers, that is, those born after 1983, have significantly increased their spending on various luxury items since 2009. Such luxury items include travel, fine dining and other luxury items such as jewelry and name brand clothes.
Young people are urged to start educating themselves about the dangers of credit cards – and how to get things under control. This includes reading the news and signing up to a personal finance blog. When Canadian youth know more about the ins and outs of everything they sign up for, it can be a very educational time. No one should spend more than what they are able to pay back when they make purchases on credit.
What is borrowed today will need to be paid back eventually. When too much is charged, there are problems with only making minimum payments or even skipping payments due to lack of funds. Neither of these is acceptable because it will lead to bad credit, making it harder for youth to recover in order to get the loans they need later in life.
The youth of today are cautioned to make small sacrifices so they don't have to be denied saving for what they need later on.
Tips For Starting To Manage Smarter
Pay at least the minimum. The biggest problem that many young Canadians make is not paying at least the minimum payment due on the credit card. When the statement comes out, there's 30 days to make a payment. If a payment isn't received, it can result in the loss of promo rates as well as a hike in the interest rates. If even more is paid each month, it will make it possible to pay off balances faster and save money on interest fees. If a minimum payment cannot be made, it's important to contact the card issuer as soon as possible. Sometimes a situation can be explained and they will work with people to establish better payment terms.
Try to pay more whenever possible. Any and all credit card debt should be paid as soon as possible. Those who have significant amounts of debt will pay more in interest rate the longer the balance is kept. Depending on the amount of debt and the interest rate, it may take over 15 years to pay off a credit card debt if only the minimum payment is made each month.
Don't depend on the credit card. Many of today's youth depend too heavily on their credit card. This dependency needs to end. 18% of respondents in the survey said that they use a credit card to supplement their income, which is extremely dangerous. 14% also said that they regularly max out a credit card and look at another as a back-up. Anyone who is found using their credit card for basic necessities needs to stop. It's a good indication that one is living above their means. Credit cards should never be used to pay off other credit cards. One needs to stop and look at their spending habits – and cut wherever possible.
Having a credit card isn't always a bad thing. While a mismanaged credit card can lead to debt and various credit score problems, it doesn't always have to be this way. Those that take the time to open a credit card and manage it responsibly are taking a step towards financial responsibility. Managing a credit card intelligently will lead to building a strong credit rating. This can lead to getting better interest rates when applying for car loans and mortgages.