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Despite high-profile charging habits,
young adults must save for a rainy day because that day may come.

LYNNE MEREDITH COHN STAFF WRITER

ecently, CNBC reported that
a 4-year-old dog received a
credit card in the mail. When
there was no response to the
offer of a pre-approved card
with a $1,000 limit, the dog
was sent a letter asking why he hadn't
responded.
In the opinion of financial advisers
like Lisa London, vice president of in-
vestments at Smith Barney's South-
field office, that is the cause of young
adult debt.
"They get credit cards in the mail
with letters that say go ahead and
spend as much as they want," London
says.
No matter what lifestyle you're used
to, it's pretty difficult to replicate in your
20s or 30s the hard-won life-long fi-
nancial success of parents in their 50s.
Accept it. And don't try to mimic their
ways by maxing out credit cards until
you can't see past the pile of debt.
Oops — already there? Well, unfor-
tunately you're not alone, and there are
ways to chip away at debt and start sav-
ing.
"It's most important to pay off your
credit card debt before you start sav-
ing, because otherwise you'll fall fur-
ther and further behind," says Bernie
Kent, Midwest regional director of per-
sonal financial services for Coopers &
Lybrand.
On average, you earn 5-8 percent in
interest by investing, says Kent. But
you pay 14-22 percent in interest on top
of the credit card purchases you haven't
been able to pay in full.
First, Kent recommends getting a
second credit card to use for charging
only what you can afford to pay in full.
"There's nothing wrong with using cred-
it cards, but do everything you can to
pay off debt as soon as possible and
hopefully pay it off every single month."

The Credit Card Monster

LYNNE MEREDITH COHN STAFF WRITER

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emember the credit card
companies which set up
folding tables on campus
and lured students to sign
on the dotted line in exchange
for a free Coke or university-dec-
orated water bottle?
Boy, were we gullible. And
they smart.
Many young adults carry a
credit card balance, paying only
a minimum amount each month
and, of course, finance fees. Eigh-
teen percent APR? Did you read
the fine print?
Credit cards can get you and
often do, with their pay-later

promise of immediate gratifica-
tion. But when the leather trend
is old hat and you're still paying
off that biker jacket, was it worth
it?
1: Trade in credit for debit.
It looks and feels like credit,
but actually deducts automati-
cally from your checking account
at the time of purchase. That
way, you won't get a huge bill of
charges that you already forgot
about.
Called the Big Switch, banks
are issuing 1.3 million debit
cards per month, according to a
July 13 New York Times article.

Problems: You'd better re-
member to enter the amounts in
your checkbook register. Also, if
you lose it, you'll be out more
dough than if you lose your cred-
it card — roughly $50 by the
time you report a stolen credit
card, but $500 gone with lost
debit cards.
2: Consolidate.
Financial advisers recom-
mend combining all outstanding
debts and trying to get a personal
loan from a bank, to pay off over
a fixed amount of time.
3 Charge only what you can
afford.

If you can't afford it now, you
probably won't be able to a
month from now, according to
a Lifetime TV special. Restau-
rant meals and groceries are the
worst charges because they're
gone before the bill comes.
4: Watch out for annual fees
and changing rates.
Although it may come with a
special nine percent APR, that
low rate may only last for a year,
says Lisa London, vice president
of investments at Smith Barney
in Southfield. At year's-end,
"evaluate your financial situa-
tion and maybe get a new cred-

it card" with a lower interest
rate.
5: Do not take out cash ad-
vances.
Some credit card companies
charge an automatic fee of about
two percent just for withdraw-
ing cash.
Finance charges are calculat-
ed from the day money is taken
out until the day you complete-
ly pay it off. But on the state-
ment after you finishing paying
it off, you will notice additional
fees, called "trailing finance
charges." Li