2. Go over the ABCs

Most teens know that plastic buys things they can’t afford with cash, but don’t understand the real cost of credit.

• Make sure they understand the differences between ATM cards, debit cards and credit cards, and that they must repay credit expenses—clothes, car repairs—with interest.
• Explain how interest works. Emphasize that paying off balances each month will help them avoid finance charges. Your teens need to know they could pay over $200 for a $100 CD player because of several months’ interest and late payment fees.
• Finally, make the point that abusing credit cards could damage their credit history, making big purchases—cars, homes—much more difficult.

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