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How young is too young for a credit card?

MSNBC columnist (and one of my former college instructors) Bob Sullivan asked an interesting question last week. How young is too young for a credit card?

I think the credit industry used to draw the line somewhere around age 19 or 20. But things changed a lot in the 1990s.

Personally, I think at 18 or 19, it’s a good idea to carry and use one or perhaps two credit cards. I’m a lot more concerned about the credit limit than I am about age.

Believe it or not, when I was 18, I had a hard time getting a card. And when I finally did, the first couple of cards I got had very low limits. I had a Citibank card with no more than a $1,000 limit on it, and I had another card from a regional bank, which I still have, with a limit of a few hundred on it. That limit may have been as low as $400.

What’s good about a card with a $400 limit is that it’s basically useless if all you do is make the minimum payment every month. It builds in planning and discipline, which is the key to not getting in over your head with credit cards. You won’t be making more than one major purchase every month, and you’ll have to have the first major purchase paid off before you go and make another one.

And let’s get serious: How many major purchases does an 18-year-old really need to be making? When I was in college, we all had hand-me-down furniture. I knew a few rich kids who had really fancy computers and really fancy stereos. Most of us just had what we needed to get by. I didn’t even have a television. I wasn’t there to impress people; I was there to get an education. And it sure seemed like the kids who had the fanciest stuff were the least likely to graduate.

Nevertheless, I did use my card. I put my textbooks on it. I bought gas with it. Once a month or so, I’d wander downtown to a used CD store and buy $20 or $30 worth of CDs on my card. I pretty much used it whenever I could, and I paid it off just as quickly as I could. When a bill came in the mail, I wrote out a check. I got into trouble a couple of times when a bill didn’t arrive and I didn’t pay it, but that’s why I’m no longer a Citibank customer.

I got a Discover card just as soon as I could. The guy next door had one, and he used it as much as he could and paid it off every month. “It’s free money,” he told me. Once Discover approved my application, I cancelled my Citibank card. My brother-in-law who runs a small-town bank says that’s something you should never do, but I was tired of dealing with Citibank. If I think a credit card company isn’t treating me well, I’d rather get rid of the card and replace it with one from someone who’ll treat me better.

Discover did. As I demonstrated an ability to pay off my balance every month, Discover ratcheted up my limit. One semester, I realized my credit limit was high enough that I could pay my tuition with it instead of writing a check. So I did, then I wrote Discover a check the next month. A few days later I got a nice little letter in the mail informing me that my credit limit had been raised by $1,000.

The only trouble I ever got into, credit-wise, when I was in college was when I got slapped with a couple of late fees, and one month where I didn’t plan things as well as I should have and ran my balance up to $1,000 or so and didn’t have enough in the bank to pay it all off that month. That’s comparatively mild. Those $30-$40 fees hurt when you’re making $9 an hour upgrading and fixing computers, but they aren’t life-changing. Neither is paying interest a month or two on a $1,000 balance.

I knew people who weren’t as lucky. As much trouble as I had getting credit in the early 1990s, something changed in the late ’90s and it started flowing like the mighty Missouri and Mississippi rivers. They got cards and they used them, racking up crippling balances on the way to buying who-knows-what. Some had to drop out of school before graduating in order to get jobs so they could start paying down that debt. That was a better option in 1996 and 1997 than it is today. I don’t know what students in that situation do today.

But I guess luck didn’t have a lot to do with it. Dad certainly used credit more than I do, but he never went into debt without a plan for how and when he was going to pay it off. And I guess most parents don’t teach their kids that, and schools certainly don’t. I had a well-meaning history teacher in high school who would talk about finance in between classes, and he told us to get credit cards and use them to build a credit history, but to pay them off just as quickly as possible. But I got no formal instruction whatsoever about money in high school. It probably belongs in math classes, but they were too busy teaching us stuff I’ll never use again in life. We did interest calculations in my algebra classes, but the instructor always gleefully said that wasn’t how interest rates are calculated in the real world, that the real-world calculations were simpler. And it was never, ever accompanied by a useful observation like, “Look at the large difference between the original purchase price and what you end up owing!”

Maybe that’s what they talk about in Home Economics, but that’s not a class my guidance counselors steered college-bound males into taking.

It’s a problem that needs to be solved.

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