There has been an enormous increase in the number of teenagers holding credit cards. This has become a growing epidemic with most teenagers ending up with large amounts of debt. Being young, most teenagers don’t know or understand debt management and once they end up with large amounts of debt, they don’t understand how to get out of it. The result is that most of them start life with a bankruptcy or a bad credit history. Most of them work very hard for prolonged hours but still fail to settle their debts and some even get trapped in circular debt crisis in an attempt to make debt settlements. Here we will attempt to explain the reasons behind this enormous increase in teenager credit card debt, despite the mostly grim consequences.
Reasons behind this increase are the aggressive marketing by credit card companies and the myth parents hold about providing their young child with one; that this is a way my child will learn money and debt management. Moreover, credit card debt is viewed by teens as an extension to their income and to the freedom where they can make purchases without bothering their parents or about whether or not they have money. Lastly, it is also because of the ignorance of teens about how credit cards work and the connection between credit card and cash. This lesson is learned however, though it is learned hard way.
Banks and credit companies view students as one of their potential customers and target them today. This way, by the time they start their career, the company already have them as their customers. This brings additional income to the company. So, they portray credit card as an essential need of the student. Due to influence of this image portrayed by marketers every student wants to look cool, spending care free and having freedom from cash and financing worries. Obviously, this freedom comes at a cost, of which student is quite oblivious.
Teens in their high school or early college years are too young to really be smart with their spending and obviously many youth have many things that are trying to grab their attention and they can find it very attractive to spend freely on whatever they want. So, they keep on spending blindly on unnecessary things: going to theaters, partying with friends and ordering midnight pizzas. All the while they are piling up heaps of debts. Even consumer groups are raising concerns on the legitimacy of providing a credit card to teens. This means they will have free access to things available online those are not appropriate for them, like pornographic content, dangerous liquors and deadly weapons that can be purchased without the knowledge of parents using credit card online.
Parents believe credit card will teach their teen to become responsible while this is not the case. Teens just view it as free money and are mostly unaware of the interest, late payments and other costs associated with non-payment. When the credit card becomes unmanageable, parents usually jump in to rescue their young one and this makes them even more irresponsible about the payment since they know they will be eventually rescued.
Recent studies have shown that only 52% of the high school students are aware of credit card and taxation issues; which shows a grim state of affairs. These are the students who are target of marketers and their ignorance means vulnerability. Teen who don’t know how to payoff their financial debt, eventually destroy their credit history and some even commit suicide because of unmanageable debt and having no one to help them out of it.