Oh, Brother!
by Cindy Messina
by Cindy Messina
Once upon a time, you went shopping with your little brother, not because you wanted to, but because your mom gave you permission to drive the car to the mall only if you took your brother with you. You could have done without your brother, but you wanted to buy a pair of boots that were finally on sale. So, off you went... to the mall... with your brother.
At the mall, when you found your boots, you pulled out your credit card to pay for them. Your little brother asked you, “What IS a credit card, anyway?”
You said, “A credit card is what you can use to borrow money from a credit card company like Visa, Discover, or Master Card. It’s like a loan.”
“You mean all I have to do is get a card and I can borrow as much as I want?” He was all excited. “I’m going to do that when I get older! I can spend as much money as I want! Awesome!”
“Oh boy, here it comes”, you thought. You snapped back at him, “Do you think money grows on trees? Credit card companies aren’t going to just give you money for free!”
Clearly, he was offended and a bit embarrassed. You decided to take pity upon him and help him understand.
“Getting credit is when a bank or a credit card company agrees to give you money and you agree to pay it all back when you get your bill. Pay it on time, or else you’ll have to pay interest.”
He asked, “What’s interest?”
You thought, “Couldn’t he just go play in the toy aisle like he did when he was little?” Instead you said, “Interest is the cost of using somebody else’s money and that ‘somebody else’ is called a creditor.” You thought to yourself, "Maybe he’ll stop talking if I use a big word he doesn’t understand.”
“Oh,” he said, flatly. He just stood there staring at you.
You sighed. You were annoyed, but decided to be kind. You said, “The creditors are the people who loan you money, the principal is the amount you borrowed, and the interest is what you pay the creditor for letting you use their money.”
“Oh,” he said, still staring.
You took a deep breath and explained how if you don’t pay the whole amount back on time, not only do you have to pay interest, but you are also charged a late fee. You said, “If you can’t pay it in full and on time every month, that means you are spending more money than you earn. You’ll be in debt.”
Finally, he spoke. “Can’t you just pay them back a little bit at a time?”
You said, “Well, yes. That’s called making a minimum payment. If you pay the minimum payment amount that is written on the bill, you will still be able to use the credit card. But, if I did that with these boots, in the long run, these $40.00 boots could end up costing me about $56.00 or more.”
He was thinking. He seemed puzzled. Meanwhile, you were contemplating if your boots look cool and at the same time hoping your sister doesn’t wear them.
He snapped you out of your daydream and said, “Let me see if I’ve got this right. If you make just the minimum payment, only some of your payment goes to the amount you borrowed and the rest of it pays the interest?”
“You got it, Pal.” You added, “You’re smarter than you look.”
You were on a roll. You went on to say, “To make matters worse, people will keep using their credit cards and make only the minimum payment every month and owe more and more and more. It’s crazy! People have a very hard time paying all the money they owe. In the end, they will be paying the creditor a lot more than they borrowed in the first place, or flat out go bankrupt.”
“Hold up," he said. “Isn’t there a limit to how much people can borrow?”
“Ah. Well done, Grasshopper.” He didn’t get the joke, but that was OK, you continued. “Yes. There is a credit limit. The credit card companies will set a limit on how much money a person can borrow. They want to loan money, collect interest and late fees, but they also want to make sure people will eventually be able to pay back what they borrowed.” You added, “The credit limit amount is also written on the monthly credit card bill.”
He shrugged his shoulders and started walking towards the door. He looked defeated. He said, “Forget it. I’ll never get a credit card.”
Oh, brother! He opened a whole new "can of worms", as your dad used to say. Dare you go on and tell him more, or will his head explode with too much information in his brain?
You decided to tell him why he will need to get a credit card one day. “Come on. Let’s get some ice cream, and we can talk about it some more”.
After you sat down, you told him about how important it is to establish good credit. You told him about credit scores. The example you gave him was pretty good. You compared earning a good credit score to earning good grades.
“You get a high credit score when you pay your bills on time. The higher your credit score, the more money creditors will loan you because you demonstrated you are responsible.”
You gave him advice. “Start with charging a small amount on a credit card. Pay the full amount on time or early every month. Soon, you will establish good credit. Your excellent credit score will be recorded on a credit report, like a report card. Eventually, you will be able to borrow a higher amount of money. For example, you might need to borrow money to buy your first car.”
Talking about cars made him pay even closer attention. You said, “A good credit history is like getting great grades over a long time. It shows you are responsible. Creditors are more likely to let you borrow more money from them when they see you are responsible and paying your debts on time. As I said, it’s like getting good grades on your report card. You show Mom you are responsible, and you might get bigger responsibilities, get more freedom, and become more independent.”
After you told him he had ice cream on his chin, you told him about bad credit scores and how, if he is not responsible, his credit score will get so low, he won’t be able to borrow money at all.
He said, “I am going to get a really high credit score. That way, I can borrow a larger amount of money when it’s time to take out a loan to buy a car!” He hesitated and said, “Wait a minute. I know a kid who has a new car. He got a car loan and he told me he never borrowed money before. How is that possible?”
You had so much patience. You answered, “That’s probably because he had a cosigner when he applied for the loan. His cosigner was someone who has good credit and signed the car loan application, too. The cosigner was probably one of his parents. This way, if your friend doesn’t make his car payments every month, the bank will make his cosigner pay for the car. If people don’t pay for their cars at all, their cars will be repossessed and towed away.”
He said, "I think I'm understanding it better. Thank you."
You fainted because your brother never says, "Thank you".
When he turned 18, he got his first credit card and you both lived happily ever after.
The End
At the mall, when you found your boots, you pulled out your credit card to pay for them. Your little brother asked you, “What IS a credit card, anyway?”
You said, “A credit card is what you can use to borrow money from a credit card company like Visa, Discover, or Master Card. It’s like a loan.”
“You mean all I have to do is get a card and I can borrow as much as I want?” He was all excited. “I’m going to do that when I get older! I can spend as much money as I want! Awesome!”
“Oh boy, here it comes”, you thought. You snapped back at him, “Do you think money grows on trees? Credit card companies aren’t going to just give you money for free!”
Clearly, he was offended and a bit embarrassed. You decided to take pity upon him and help him understand.
“Getting credit is when a bank or a credit card company agrees to give you money and you agree to pay it all back when you get your bill. Pay it on time, or else you’ll have to pay interest.”
He asked, “What’s interest?”
You thought, “Couldn’t he just go play in the toy aisle like he did when he was little?” Instead you said, “Interest is the cost of using somebody else’s money and that ‘somebody else’ is called a creditor.” You thought to yourself, "Maybe he’ll stop talking if I use a big word he doesn’t understand.”
“Oh,” he said, flatly. He just stood there staring at you.
You sighed. You were annoyed, but decided to be kind. You said, “The creditors are the people who loan you money, the principal is the amount you borrowed, and the interest is what you pay the creditor for letting you use their money.”
“Oh,” he said, still staring.
You took a deep breath and explained how if you don’t pay the whole amount back on time, not only do you have to pay interest, but you are also charged a late fee. You said, “If you can’t pay it in full and on time every month, that means you are spending more money than you earn. You’ll be in debt.”
Finally, he spoke. “Can’t you just pay them back a little bit at a time?”
You said, “Well, yes. That’s called making a minimum payment. If you pay the minimum payment amount that is written on the bill, you will still be able to use the credit card. But, if I did that with these boots, in the long run, these $40.00 boots could end up costing me about $56.00 or more.”
He was thinking. He seemed puzzled. Meanwhile, you were contemplating if your boots look cool and at the same time hoping your sister doesn’t wear them.
He snapped you out of your daydream and said, “Let me see if I’ve got this right. If you make just the minimum payment, only some of your payment goes to the amount you borrowed and the rest of it pays the interest?”
“You got it, Pal.” You added, “You’re smarter than you look.”
You were on a roll. You went on to say, “To make matters worse, people will keep using their credit cards and make only the minimum payment every month and owe more and more and more. It’s crazy! People have a very hard time paying all the money they owe. In the end, they will be paying the creditor a lot more than they borrowed in the first place, or flat out go bankrupt.”
“Hold up," he said. “Isn’t there a limit to how much people can borrow?”
“Ah. Well done, Grasshopper.” He didn’t get the joke, but that was OK, you continued. “Yes. There is a credit limit. The credit card companies will set a limit on how much money a person can borrow. They want to loan money, collect interest and late fees, but they also want to make sure people will eventually be able to pay back what they borrowed.” You added, “The credit limit amount is also written on the monthly credit card bill.”
He shrugged his shoulders and started walking towards the door. He looked defeated. He said, “Forget it. I’ll never get a credit card.”
Oh, brother! He opened a whole new "can of worms", as your dad used to say. Dare you go on and tell him more, or will his head explode with too much information in his brain?
You decided to tell him why he will need to get a credit card one day. “Come on. Let’s get some ice cream, and we can talk about it some more”.
After you sat down, you told him about how important it is to establish good credit. You told him about credit scores. The example you gave him was pretty good. You compared earning a good credit score to earning good grades.
“You get a high credit score when you pay your bills on time. The higher your credit score, the more money creditors will loan you because you demonstrated you are responsible.”
You gave him advice. “Start with charging a small amount on a credit card. Pay the full amount on time or early every month. Soon, you will establish good credit. Your excellent credit score will be recorded on a credit report, like a report card. Eventually, you will be able to borrow a higher amount of money. For example, you might need to borrow money to buy your first car.”
Talking about cars made him pay even closer attention. You said, “A good credit history is like getting great grades over a long time. It shows you are responsible. Creditors are more likely to let you borrow more money from them when they see you are responsible and paying your debts on time. As I said, it’s like getting good grades on your report card. You show Mom you are responsible, and you might get bigger responsibilities, get more freedom, and become more independent.”
After you told him he had ice cream on his chin, you told him about bad credit scores and how, if he is not responsible, his credit score will get so low, he won’t be able to borrow money at all.
He said, “I am going to get a really high credit score. That way, I can borrow a larger amount of money when it’s time to take out a loan to buy a car!” He hesitated and said, “Wait a minute. I know a kid who has a new car. He got a car loan and he told me he never borrowed money before. How is that possible?”
You had so much patience. You answered, “That’s probably because he had a cosigner when he applied for the loan. His cosigner was someone who has good credit and signed the car loan application, too. The cosigner was probably one of his parents. This way, if your friend doesn’t make his car payments every month, the bank will make his cosigner pay for the car. If people don’t pay for their cars at all, their cars will be repossessed and towed away.”
He said, "I think I'm understanding it better. Thank you."
You fainted because your brother never says, "Thank you".
When he turned 18, he got his first credit card and you both lived happily ever after.
The End
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