I’m sure we’ve all heard stories of young adults who got their first credit card and got into all kinds of debt. Luckily I never got into that mess. Instead I blew a bunch of cash from student loans and summer jobs on partying. If I was into shopping, it could’ve got a lot uglier.
When young people suddenly have access to credit there is sometimes just too much temptation. They likely didn’t have a whole lot of spending money earlier in their lives. They were also probably more accountable to their parents in the past. The new-found freedom is just too much to resist.
Beyond the temptation, a lot of young adults just don’t realize the downsides of using credit cards and the trouble they can cause. They simply start charging thinking they can pay that money back whenever they want. Somehow they justify the interest charges as a small price to pay for not having to wait.
Instead of learning about credit cards through mistakes, there is a better way. Rather than getting a credit card while in college or shortly after, they should consider opting for a prepaid card instead.
Basically they could get a lot of the convenience of credit cards, but without the risks. There is no chance of overcharging and ending up with a hefty bill. If they’re charging on their prepaid card, they have no choice but to load money onto the card first.
Sure this may seem like a hassle at first, but that extra planning helps develop healthy spending habits. You get in the mindset of only buying what you can truly afford. If you don’t have the money upfront, you simply cannot make the purchase. Plus you think twice about purchases to decide if you really need that item.
For today’s generation one of the major conveniences that would be available with this strategy is online shopping. Without some kind of charge card, it can be quite difficult to shop online. A prepaid card can take care of that need without an excessive spending binge.
Moving On To a Credit Card
Eventually it might make sense to upgrade to a credit card, but that prepaid card usage should give a better appreciation of charging things to your card. Now that you are accustomed to having to fully fund any purchases you charge, that should just be second nature to you. Because you’ve had a charge card for a while now, you wouldn’t look at it as a tempting loan.
Ideally by then you are also a little older and more responsible. You might’ve even become more financially responsible due to life experiences in that time. You might have a greater appreciation for money and how important it is to properly manage it. Maybe you’re over the temptation of buying things you can’t really afford.
Of course, this won’t be the case for everyone who starts off with using prepaid cards. Some of those people will still jump at the chance to rack up a bunch of debt. This is why it is important to not rush to move on to credit cards too early. Take your time and put that off until you are sure you will use your credit card responsibly. In the meantime, read up more about how to avoid credit card debt. Maybe read about how others got into problems and how it affected their lives.
You don’t have to make those same mistakes. By learning the ropes with prepaid cards you can avoid that situation and learn how to use charge cards to your advantage.
Prepaid cards aren’t just for young people though. Adults of all ages can benefit from them by using them for budgeting, savings or risk-free shopping. Perhaps you want to limit yourself to a certain spending limit while shopping. Or maybe you just want to separate some of your spending for easier budget tracking. Not everyone is comfortable using their credit card for stuff like online shopping. So don’t just assume they are only for people who don’t yet have a credit card. Everyone can benefit from them.