Credit is a powerful tool. It’s convenient and especially useful in emergencies. But it’s also a big responsibility. According to a 2004 study by Nellie Mae, a national student loan provider, 76% of college students started the school year with credit cards, and 79% of those carried balances each month. Using credit unwisely can lead to unmanageable debt and financial problems.

Consider this example: If you racked up $3,000 of credit card debt with an annual interest rate of 14% and you paid off $100 per month (and racked up no additional charges), it would take you approximately 38 months to pay your balance off. What’s even more eye-opening is that you’d end up paying over $700 in additional interest—almost a quarter of the original debt.



Use our Debt Calculator with your teenager to determine how much a credit card balance not paid off in full every month could cost in interest.

If you or your teen are currently carrying credit card debt, you can use our Credit Card Payoff Calculator to see how fast you can pay it off.

And it's not just about the cost of debt. Did you know that how you use credit directly impacts your credit standing? Lenders can view your entire credit history when deciding to issue a car loan or home mortgage. Landlords and employers often have access to credit reports as well, so credit can even impact your ability to get an apartment or job. What’s more, this information can be tied to you for years, so if you make poor financial decisions when you’re young, it could haunt you well into the future.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of savings and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction or strategy for his or her own particular situation. The examples mentioned are for informational purposes only and are not intended to represent results you should expect in the future. Data contained here is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.