Teaching Teens About Student Credit Cards

Each year thousands of teenagers graduate from high school and many of those same students will go to college in the fall. Most of those students will be enthusiastic about being on their own and embracing all that adult life has to offer. This includes getting credit on their own. Will your student be ready to face the onslaught of credit card applications that will be thrown at them? Most parents are worried about their children settling into their dorm rooms, making sure they have their textbooks before classes start and giving them a pep talk about partying. The last thing on their mind is educating their children about the dangers of student credit cards.

It doesn’t matter how bad the economy is; credit card companies are always on the lookout to expand their brand and get their cards into as many hands as possible. For many companies, this means getting young adults to apply for their cards. There will be credit card offers stuffed in textbooks, tables on the campus green staffed with people taking credit card applications and local retail stores will have tables setup at their entryway so they can accept applications from new students on the local campus.

Even if the student doesn’t have a job, they can often obtain credit cards with several thousands of dollars in available credit. While parents may think their children can’t get credit cards without a job, the reverse seems true. Students can apply and simply state their major program of study. Their credit limits are generated according to the average starting income for someone who graduates with that degree. While a fair number of students are careful with these new credit cards, there are still a number of students who have no clue how to manage their finances and therefore ruin their credit before they even graduate from college. These students will have difficulty landing their first jobs if a company checks their credit history, obtaining a loan for their first new car or applying for a mortgage for their first home.

Some high schools are teaching juniors and seniors about managing their budget and about using credit cards. This is a welcome addition to any business curriculum. It is equally important for parents to educate their children about credit cards and the impact their credit report has on their everyday lives. This important topic is often forgotten, probably due in part to parents taking care of their children’s finances until they go away to college or start their first jobs.

Teaching children about being responsible when managing their money and credit isn’t as difficult as some parents think. It can be started early in life with managing a small allowance and expanded upon when a teenager starts working to earn spending money. Teaching teenagers to save some of their income is an important part of personal finance management. Teenagers should be allowed to open a savings account to help them save money for something that they desire, from a car to college. If they have a joint account with a parent, withdrawals will have to be approved by the parent. This opens a dialogue to discuss saving and budgeting whenever a teen wants to spend the money.

Another way to introduce young adults to managing credit cards is to get them a pre-paid credit card. This will give them the freedom to use a credit card, but with restrictions on how much they can spend. Once they’ve spent their allotment, that is the end of the spending, since there isn’t a way to spend over their limit. Some parents use these pre-paid student credit cards as a way to manage allowances and teach children about using credit cards. The student has to budget and keep track of their earnings. Many of these credit cards have online account management tools that help young credit card holders (and their parents), keep track of their balance.

College students who have obtained their first real credit cards should obtain a copy of their credit reports each year. This will give them a real-time look at how their payments on credit cards are reflected. It can also help them monitor their credit score and help them identify an errors on their reports. When caught early, mistakes on credit reports can usually be corrected. It is also a good idea for students to enroll in identify theft protection programs to help them safeguard their fledgling credit history.