Dear Debt Fighters,
As we grow our site, our goal remains the same.
#1 Increase finance literacy. Basically this boils down to helping parents educate their kids about finance basics Also we found many adults using our site to improve their own finance situation.
#2 Be able to learn in a convenient way. That is why our website is 100% compatible on all mobile devices.
So last week, it was a great honor to be mentioned in a popular mommy blog, Pragmatic mom. Blog Barbara Stapleton uses our sites to help educate kids about credit cards.
Here are some of her pointers.
Debit cards 101 for Kids
Buy Now; Pay Now
The money that you access on a debit card comes from your checking or savings account, so you pay for it immediately.
There are not any interest charges on debit card purchases.
If you don’t keep track of your account balance, overdrafts may happen.
Debit cards are a good choice for every day purchases, particularly what I like to call consumable purchases (consumable – anything that doesn’t last for a reasonable amount of time – food at restaurants, groceries, gasoline, you get the picture)
BE AWARE: debit card holders can be held accountable for up to $500 of unauthorized purchases if the card isn’t reported as stolen within 48 hours, so this is why it’s important to track your spending and know what’s going on in your account (but that’s another lesson).
Credit cards 101 for Kids
Buy Now; Pay Later
Credit cards are NOT tied to a checking or savings account. Credit cards at the most basic understanding are a loan.
Going to say it again money available on credit cards is pre-approved credit. It is borrowed (a loan) from the bank and paid back later.
There is an interest rate charged on unpaid monthly credit card balances. That interest rate (APR) carries over from one month to the next on any of those unpaid balances.
Interest rates vary. Interest rates can vary, A LOT. Yes, you may get an introductory 0% interest rate, but it’s only introductory and if you don’t get all that you charged up paid off before the introductory period over, then guess what – you’re paying interest on what’s left. So all those sale items aren’t so much on sale anymore!
Those rates depend on a lot of things know as ‘creditworthiness’, which is just basically – how much you owe (debt), how much you make (income), your credit score and if you’ve been paying ALL of you payments and bills on time.
There are limits on the credit card ‘loan’ you have, you can’t just spend and spend. Remember, they know how much you make and how much you owe to others, so they have to put a limit on the credit card.
You get a monthly statement (might be in the mail, or you could have them send it to your e-mail or get it through a log-in account on their website). You have to have some money from a job or other income to pay that balance every month.
The best thing about credit cards – they’re great for emergencies. They’re also good for protecting you when you make online purchases. Why? If your card or the number is stolen, you should only be responsible for the first $50 of unauthorized charges. That’s a relief!
For more details, read
Credit Card Lessons for Kids Before They Use Them!