Student Credit Card Guide for Parents
How old were you when you started establishing your credit history? Many people graduate school and start life outside their parent’s house and connecting the power in a new apartment might require a hefty deposit or co-signer if you do not credit history.
When I was 17 my parents co-signed a student credit card with a $200 limit to help me establish credit and develop positive spending habits under their supervision. I had to pay the card off and was responsible for all purchases. Yes, they were co-signers and liable but my limit was not excessive and they trusted me. I had no idea how much this would help until college. As it turns out, I had credit history! I did not have trouble finding an apartment off-campus or connecting my cell phone with high deposits on the accounts or co-signers.
Some parents may not recognize the opportunity helping their teen or college student develop management of their finances because they cover all their child’s expenses. When the kids grow up and are out on their own, they need to have the skills to not end up in debt. Also, a debit card is not the same thing.
Can you trust your teen with a credit card?
I can’t answer that for everyone. If you have a history of bailing out your son or daughter every time they run up a bill they can’t pay, it may be time to re-visit that policy. You also can’t protect them forever from responsibility. Students need to reach a level of responsibility with you develop with them before they get a credit card.
If you don’t assist them, someone else will do it for you! College campuses are littered with booths where students can sign up for a credit card there on the spot and get a free t-shirt or mug. Warn your student about signin up for special student credit cards at those locations. These compaies bank on the fact that the college student will have a job after school. This is dangerous and tempting. We all know how the mismanagement of credit in this nation has hurt over the past couple of years. Be involved and help them make decisions so they don’t end up falling for any scams or outrageous credit accounts.
Help your teen understand credit
The more your teen knows about credit and how it works, they better prepared they will be to manage their accounts. If you still don’t have all the information yourself then take the time to learn. It will help you out as well. Explain how credit scores work, consequences of not paying debt, associated fees, etc. Their credit score is their personal responsibility and not something a parent can fix by calling the bank on their behalf.
Do the research with them. Walk them through the process of selecting the best ways to build their credit history and manage their finances. They will end up with the knowledge they need to be successful and responsible when they are on their own. The last thing we need is for students to end up in debt they can't handle. Developing a financial plan with your student and teaching them money management skills is necessary.
Choosing the Right Card
Do the research on the right type of card or credit line for your student. The first place to look is online comparing student credit card rates and types. Have an idea of what to expect and first check with your family's bank. Open your student a savings account if they do not already have one and get a card through a reputable bank. If you have a credit card for yourself that has provided great service, ask for a low rate and good deal on an additional card with them. Avoid signing up for multiple cards, and for cards with low introductry APR rates that jump very high after 6 months or a year, or have annual fees.
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Resources on Debt & Credit for Students
- Severe debt can cause depression and even suicide
Getting depressed over an increased debt load is normal, experts say, but some people just can't seem to dig their way out and become so despondent they contemplate or attempt suicide.
- Project on Student Debt: Home
Raising awareness about rising student debt and developing practical solutions to increase college access for all students.
- Credit Card Tips for College Students by Consumer Reports
Great Tips and Advice for College Students