Teens falling into debt

By Adrianne Jeffries

Special to 757

If you're a teenager, you probably don't remember the good old days when gas was $1.50 a gallon. Even if you just started driving this year, you've experienced creeping, then skyrocketing, prices.

And for teens who usually earn low wages, if they work at all, filling up a tank of gas can take a big hit on the ole pocketbook.

So, how are teens handling the financial stress?

Some are responding in a classic teenage way - by procrastinating. A recent poll showed that teenagers who have credit cards are increasingly using them to buy fuel.

Gas surpassed clothes this year as the most common item purchased by teens who use credit cards, according to a survey done by Junior Achievement, a nonprofit organization that educates young people about real-world economics.

The survey showed that 68 percent of teens are using a credit card to pay for gas. That's up from 52 percent last year and 46 percent in 2006.

Alyssa Jones of Virginia Beach got her first credit card when she turned 18 in February, about the same time she started driving. Her mother, Beth Jones, encouraged her to start using the card because she said parents should teach their kids about the importance of establishing a credit history.

"Kids don't know anything about credit until it's too late and they've ruined it," Beth said.

Alyssa uses the card almost exclusively for gas because she said it is easier than going inside to pay with cash. But sometimes, when the bill comes, she doesn't pay the entire balance.

"I don't pay the full amount, but I pay a lot more than the minimum payment."

She chooses not to pay more, she said. Alyssa makes $8.15 an hour plus tips at a Virginia Beach Starbucks working between 18 to 30 hours a week.

Alyssa is lucky to have a credit card that won't charge her interest for keeping a balance under $250.

But the 2008 Green Run High School graduate is setting herself up to become what the credit card industry terms a "revolver." Revolvers are customers who never pay the full balance on their cards; they are the most profitable type of customers for the credit card industry.

In fact, credit lenders prefer customers who pay less than they owe each month so that their debt accrues interest. PBS reported that 115 million Americans fall into this category.

Teenagers like Alyssa who are only beginning to manage their own finances may not fully comprehend the danger of becoming a revolver.

Ten percent of teens surveyed by Junior Achievement have credit cards, up from 8.5 percent last year. But 28.9 percent said they were "not sure" what the consequences of missing a credit card payment are.

"A lot of parents assume that schools are teaching kids how to be financially literate, and that's far and away not the case," said Stephanie Bell, JA's director of marketing and media relations.

Bell said the increase in gas prices is a good opportunity for families to talk about budgeting.

"It may mean that you have to spend less on entertainment or other things because you have to spend more on gas," Bell said. "Learning that we all have to make those sacrifices is an important lesson."

But Alyssa says she hasn't changed her driving or spending habits.

"I'm used to this price."

Even so, the cost to fill up her Nissan Altima rose from $40 to $60 since she started driving in February. At today's prices, it only takes her four refills to come dangerously close to charging $250. Doing so would cause the interest rate on her credit card to jump to 18.9 percent - a high price for convenience.

Adrianne Jeffries, a 2008 graduate of William & Mary in Williamsburg and a former 757 teen correspondent, adrianne.jeffries@gmail.com