What happens to our children who enter the financial world afraid of making the same mistakes as their parents? The US in filled with personal debt and there are many young adults who would rather not participate in the game. The last thing these youngsters want is to have maxed out credit card debt or be reliant on a cash advance in order to make ends meet.
Avoid a cash advance with a good financial plan.
There are many newcomers who are choosing to go without credit cards. If there is no temptation then there will no problems with the budget. Makes great sense, right? A good financial plan will have a person avoid short-term loans like cash advances and payday loans, but it will consist of a few credit cards.
In order for a credit score to be figured, the credit bureaus want a person to have various types of credit. Student loans are a great example of an installment loan, but these are not sufficient enough to build credit by themselves. They have banks accounts and debit cards, pay their cell phone bills and are still being rejected when looking to rent an apartment or buy a car. Debit cards are similar to a cash advance loan; there is no direct connection to a credit score.
https://www.youtube.com/watch?v=4ObJvFzV-3o
If you are looking to build credit, you cannot avoid credit cards. These revolving accounts are important features within a person’ credit history. In order to give a grade (a credit score) you have to do the work (make on-time payments). Because revolving credit is so different than installment loans, they are a necessity to obtain good credit.
This message goes out to the young people out there who are avoiding credit cards. (It’s actually for anyone who is avoiding credit cards completely) Don’t do it! When you are ready to go out on your own, these credit cards will support obtaining apartments, opening utility accounts and getting a car loan. Start small and limit their usage. Keep any remaining balance less than 20% of the credit limit. If you can, pay in full at the end of the month. Credit card balances have a way of infiltrating into a budget and taking over once interest starts. Pay all cash advance debt in full on the original due date to avoid extra costs. Teach yourself how to manage your monthly income so all payments go out on time every month.
It’s a catch 22; you have to learn to live with credit cards, especially if you are just starting in the adult world. Good credit will determine home mortgage or car loan approval as well as set the rate for interest attached to each. When a young adult has not had any prior money management training and has only been witness to examples of what not to do, the confusion may cause different types of problems.
Basic financial tips:
- Minimize month to month debt.
- If you have student loans, make them a priority.
- Get a couple of credit cards and use them sparingly. Don’t get caught up in spending beyond your means.
- Make on-time payments.
- Limit cash advances or payday loans.
- Learn to control and manage spending with an organized budget.
- Stick to your financial goals.
