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Are you really ready for a credit card?

Have you got a burning desire to join the legions of credit-card-carrying teens?

No doubt about it, credit cards are convenient. But, the little plastic cards can land you in a heap of heartache and trouble if not properly used.

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Before applying for a card, make sure you feel comfortable and confident about some financial basics.

Master the basics
Start by opening a checking account. Master the basic skills of writing a check and tracking your money.

After you're comfortable using your checking account and can balance a checkbook, apply for and use a debit card. A debit card looks and act like a credit card, but is tied to your checking account.

Now you are ready
When you have mastered those basics, talk to your parents about applying for a credit card under your own account at a retail store or bank.

Secured credit cards are another option if your parents are faint-hearted.

Make sure you understand how the card works, starting with the connection between charging one month and paying the next. It's not interest-free money unless the balance is paid in full before the grace period expires.

Interest keeps growing and growing . . .
Talk to your parents about interest and how it compounds if a debt piles up. Here's a quick example: If you carry a $500 balance at 17 percent and just pay the minimum amount due each month, it will take 80 months to pay it off. That's over 6 years, and it will cost an additional $325.34 in interest. The average minimum payment is 2.5 percent of your balance.

Look at the fine print and review other key terms such as late fees. Above all, keep the card safe, and know what to do if it's stolen or lost.

Tip: Make a copy of the front and back of your card for this kind of emergency.

Set limits for yourself
Sit down and decide with your parents how much you can spend and what you can buy (pizza and snacks shouldn't be on the list).

Buy only what you can pay back before the grace period ends. Build up your level of responsibility slowly. Carefully track your spending so you don't go over your credit limit.

Find the best deal
'When you and your parents feel you're ready for a card in your name, shop around for low rates and fees. Let Bankrate's credit card search help you find the right card for you.

Establish a good reputation
Pay your bills on time, every time. This habit pays off with a good credit history. A bad one can thwart your efforts to buy your first car or apartment. A good reputation will save you lots of money in interest charges and fees. Here's how to get a copy of your credit report and understand it.

Take charge
Take the responsibility for paying all or part of your balance from an allowance or job. You really appreciate the value of money when you're standing behind the register pulling in a paycheck.

One final tip -- don't sleep through your economics and finance classes!

-- Updated: May 5, 2004




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