Credit card training - Should it be a thing?
We get licenses and permits for many things. To drive a car, to be a lifeguard, to own a firearm, to build a house. This is common practice. So why is it not required to get credit?
Think about it, of course we need to pass a test in order to get a drivers license. We also need to provide proof of well thought out development plans before we are able to build a house. And there is a series of levels and tests you need to pass to become a certified lifeguard.
At the same time, thousands of 18 year olds are being handed credit card applications like flyers on college campus during their first week. They have had no formal training on how they work or how to use them. There is no test they have to pass before they are given credit to spend. This is a dangerous practice. And I know, I was a lender for many years and I saw the holes that young adults were digging themselves into, totally unaware of the consequences.
True financial wellness comes from understanding your position and your money situation. When you are not fully aware of how credit can work for AND against you, you can run into money problems that last much longer than you think. I have counselled numerous young college students out of tough fiscal situations. The root of their problems was always the same. They had no idea how poor credit management could affect their borrowing potential and their future indefinitely.
I, for one, would love to see a credit test that needs to be passed in order to receive credit and become a “qualified borrower”. Teaching young adults about interest costs, payment dues dates and mismanagement consequences BEFORE they are given carte blanche to go spend is a responsible initiative not only for the user but also for the credit card provider. Maybe it would result in less delinquencies and collections.
I know this “out of the box” thinking is likely a ways down the road… but it would sure be nice to see! Ahem, any financial regulators out there?!
A seasoned Lender and a concerned Parent