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FINANCIAL CHOICES FOR TEENS
6
ADVANTAGES OF BUYING A CAR
Resale value
Lower overall cost of ownership
Lower insurance costs
No mileage limitations
No wear and tear charges
Credit Choices
CHOOSING A CREDIT CARD
It’s important to build a good credit history so that you can continue to
make large purchases, like a car, in the future. But how do you know
which type of credit card is right for you? This depends on your spending
habits. Let’s take a look at three key questions to ask when choosing a
credit card:
Will I pay the card off each month or carry a balance?
While we
encourage you not to spend money you don’t have, many people do end
up paying off their credit card bills over time. If that is the case, choose
a card with a low annual percentage rate (APR.) You may incur a fee by
selecting a card with a low APR, but you may make up that difference
since the card will have a lower interest rate. On the other hand, if you
anticipate paying your monthly balance, it’s best to select a card without
an annual fee.
Do I pick the low introductory rate or a reasonable long-term
interest rate?
To answer this question you must once again think about
how soon you can pay off the balance. If you don’t think you can pay
off the balance in the introductory period or if you think you will have a
balance in the future, it’s best to choose a card with a reasonable long-
term interest rate as opposed to a low introductory rate. If, however,
you do plan on paying your balance monthly or you will transfer a
balance from another card, choose a card with the lowest introductory
rate. Terms for these introductory rates usually range from three to nine
months.
Do I want any perks associated with the credit card?
If you’ve already
decided to sign up for a credit card, you’d be smart to choose one
offering perks you will use. Airline miles, discounts at your favorite store
or restaurant and even cash back are just some of the rewards offered.
Be certain to keep in mind that none of these perks are truly free. You are
still spending money to earn the rewards and there may be an annual fee
for this type of card.
ADVANTAGES OF LEASING A CAR
No or low down payment
Lower monthly payments
Lower sales tax and repair costs
Ability to get a new car every few years
Drive a better car for less money
Sources:
autocheatsheet.com/research/questions-before-buying-car.html
becu.org/learn-and-plan/articles.aspx?topic=1&articles=1&webcasts=0&calcs=0
&sort=newest (various articles)
gocompare.com/car-insurance/questions-to-ask-before-buying-a-car/
teensguidetomoney.com/spending/first-time-car-buying-tips-for-teens/
What’s the difference between a debit, credit and
charge card? A debit card withdraws money from
your checking account, so you must have the funds
when you make a purchase. A credit card is
different in that you can pay for your purchase
at a later time, although you will be charged
interest. A charge card is similar to a debit
card, except that it doesn’t allow you to
pay for goods later. You must pay your
monthly bill or you will incur a fee.
WHEN SHOULD I PAY WITH A CREDIT CARD?
Now that you’ve selected the best credit card for you, you’ll have to think
about which purchases are best suited for a credit card and which are better
suited for a debit card or cash. Since smart credit card use builds a strong
credit history, it’s important to make these decisions wisely.
Use your credit card if:
• You are purchasing a large item that may be defective, get lost or be stolen.
Some credit cards offer insurance that covers the cost. If your purchase was
to be delivered and didn’t show up, your credit card company may be able
to assist you in a dispute with the merchant.
• You are traveling. While traveling always presents a risk of valuables being
stolen, you can call the credit card company to cancel the card. If your
cash is stolen, you don’t have this option.
• You are shopping online. Since your credit card can provide protection
against Internet fraud, opt to use your credit card over your debit card
for online purchases. Learn more about making secure online purchases
on page eight.
• You are making a large purchase you have carefully considered. Once
you’ve made the decision to purchase, it’s appropriate to use your
credit card. If, however, you’re not able to pay your credit card balance
monthly, resist using your credit card for smaller everyday purchases
and indulgences. These can add up quickly unless you keep careful
track of your spending.
