Debt, A Four-Letter Word: Credit Card Is a Two-Word Danger Sign Debt, A Four-Letter Word: Credit Card Is a Two-Word Danger Sign

Debt, A Four-Letter Word: Credit Card is a Two-Word Danger Sign

HEY, PSST! What's in your wallet? Got any plastic in there? More teens are answering yes to that question as the big credit card companies feel the sheer strength of the youth market. You guys have some heavy duty purchasing power. Marketers tuned into teens and twentysomethings say 12- to 17-year-olds alone—dubbed Generation Y—spend $170 billion each year, and $104 a week, on all kinds of products. Credit cards, especially with the growing popularity of online shopping, are becoming a payment of choice.

Miguel Ulloa, 18 and a 2002 graduate of New Brunswick High School, signed on for two credit cards, a Visa and a MasterCard, shortly before graduation. "I got one through my mom's account and one in my own name through a mail order," explains Ulloa, now a freshman football player at Norwich University in Vermont. "The one through my mom's account is to use for things like a train ticket home. The other, through Capital One, is to buy school books. My mom said it's good to start building a credit history now for buying a house or a car later." In the months before leaving for college, Miguel only used his credit card a few times, once to buy his family an air conditioner and another time to go out to dinner. "I know not to splurge," he says. "If I don't have the money to pay something back, I don't buy it."

Miguel's off to a smart financial start, accepting guidance from his mom and using his cards with caution. Some kids aren't so savvy. A 60 Minutes episode reported in 2000 that a college student took his own life after racking up some $30,000 in credit card debt. That, of course, is the rare exception. Eric Weil, managing partner of Student Monitor in Ridgewood, a market research company focused on the trends of college students, says the media needs to chill out a bit about kids and credit cards. "The premise of the media is that credit card companies are knowingly and willingly getting kids into debt," says Weil. "If you were in charge of a student credit card portfolio at one of these banks and a substantial amount of your portfolio continued to default on its loans, do you think you would keep your job?"

Many credit card companies are trying to enlist new customers while kids are still seniors in high school, requiring the signature of a parent or guardian. As in Miguel's case, credit card issuer Capital One leads this effort, with programs for both high schoolers and college students. According to Weil, Capital One has been a smart marketer, sending student credit card literature to parents as well as students. Capital One's Web site ( has pages of information for young potential cardholders about establishing credit histories and using cards responsibly.

Other credit warm-up exercises from writer Liz Pulliam Weston:
1. The Debit Habit. Using a debit card, which has a Visa or MasterCard logo, will allow you to make ATM withdrawals, and to use the card like a credit card. Rather than buying on credit, the money comes straight out of your bank account. It's a great way to get used to plastic, and paying off balances.

2. Got It Made with Prepaid. Ask your parents to help you research prepaid cards like Visa Buxx or Citibank's Citi Cash Card. These allow your parents to set spending limits and monitor where you are spending money, both through monthly statements and through Internet accounts that show daily transactions. The parents transfer money from their own checking accounts to the card for a small transaction fee, and the card can be used like any other credit card to make purchases.

3. How Low Can You Go. If a real credit card, interest and all, is more your style, your parents can co-sign for a card with a low credit limit, $200 or $300. Can't do much damage with that, only learn how it's done.

Early plastic prudence will prepare you to fly solo with your own card in college. Knowledge is power—in this case, purchasing power.