KIDS THESE DAYS:Steer kids away from credit trap

When I was 15, my mother did something so remarkably simple to help me establish my credit that I wondered why it has not been done before.

All she did was list me on the family checking account.

Fortunately for me, my parents paid their bills on time. So when I applied for my first credit card at age 24, I got approved. That card was a Mobil Oil card.

Getting cards was easy. Paying some of them off was not.

In a short period of time, I had a lot of credit cards. I even got one of those big, fancy credit card wallets to show them off.

But I used the cards, too, and like a lot of young adults with too much credit, it was not long before I was juggling bills.

Back then, credit card solicitations were not as sophisticated or as blatant as they are today. Companies pitch cards everywhere and most of them know that the younger they can get a customer, the more likely they are to reap the benefits of the inexperienced user.

My daughter is almost 17 and has been receiving credit card pitches for several months. The pitches are carefully worded because legally, banks cannot issue cards to people under the age of 18.

There is a reason why credit card companies want young money: As I was, most young people do not have the discipline to manage this funny money.

Recent statistics reveal that almost 78% of college students have credit cards. That wouldn’t be so bad except for the fact that, according to Nellie Mae, the average student carries a balance of $3,200. Further, one in 10 college students carries a balance of over $7,800.

All of this funnels down to a serious increase in the number of bankruptcy filings for users under 25. That percentage is now one in five.

So why are credit card companies so willing to extend credit to people with a poor history of paying their bills on time?

There are several reasons, none of which I ever expect a credit card company to admit.

First, there is a brand loyalty issue. Many companies know that if they can catch the first-time buyer for their product or service, whatever it is, they have a better chance of keeping that customer coming back to them for more. In other words, it’s easier to get a teen to keep using the credit card they already have than it is to get him to switch or to add another one.

Second, even though defaults are at 5%, this is still a very profitable business for credit card companies, who rely on monthly fees, interest and late fees for their profits.

In other words, the ideal customer is someone who uses their card, pays late but still pays and doesn’t pay more than the minimum payment required.

People like my wife, who does not maintain a credit card balance each month, are a pain in the neck because all she is returning is the fee that the credit card companies charge their commercial accounts to process the charges.

Third, these companies know that a significant percentage of teen and young adult credit card users who get into debt will be bailed out by their parents.

The bottom line is that kids need to know about how credit card companies work and how to avoid getting into debt.

But most of me feels that even with this education, it’s kind of like telling a teen about love: You can advise and caution all you want, but most of the time, they’re going to learn the hard way.

Eventually, I got out my debt by dedicating more of my money to paying off my credit card balances.

But it was painful and I don’t wish the same learning experience on anyone.