Young People Should Go Slow in Taking on Credit Cards
Steve Rosen

The young woman already had one credit card, but, like many people her age, she wanted a second piece of plastic.

The 23-year-old was a recent college graduate and had been employed full time for less than a year. She had applied for a second card because of the lure of frequent-flier reward points on United Airlines. However, the card company rejected her application.

So she asked me whether she should reapply, find another deal or stick with the one card already in hand?

I'm frequently asked that question by young adults just starting out on their own.

I've never been keen on pushing plastic on anyone until they've shown the ability to handle cold hard cash and debit cards. After all, there will be plenty of time down the road to earn points on rewards cards.

That said, here's what I shared with this questioner: First, why do you need another piece of plastic, especially if you haven't been earning a steady paycheck very long?

There may be some exceptions, such as having too low a credit limit on the first card. But in that case, after reviewing your spending, ask the card issuer to consider boosting your limit.

You can improve your chances of obtaining a second card by building up a lengthier repayment history on the first card and a longer track record on the job.

Finally, I told her, this is a good opportunity to check your credit report to make sure there are no errors that can lower your credit score, which affects your ability to obtain low rates on a mortgage or car loan, or rent an apartment. For free copies of your credit report, go to www.annualcreditreport.com.

At least the graduate who contacted me appears to be going slower with plastic than many of her peers. According to a Sallie Mae study in 2009, the average college graduate carried about four credit cards by the time he or she earned a degree.

Sallie Mae also found that the average amount of debt carried by cardholders in college was about $3,000 in 2009, up 46 percent from five years earlier. Only 17 percent paid off their balance each month, and 22 percent paid just the minimum each month, the survey found.

To understand how to use credit cards properly and to compare card types, check out the growing array of Web resources that also impart plenty of credit card wisdom. Among the best sites are www.lowcards.com, www.cardratings.com and www.bankrate.com.

It can be disconcerting to watch your young adult children load up on credit cards, especially if you've spent the past three years trying to stay solvent.

At least make sure they learn as much as they can about credit terms before filling out the application for a fresh piece of plastic.

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