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24 July, 2018

Should You Help Your College Student Get a Credit Card?

Posted in : Credit cards on by : Dave Doe

In years past, the sight of booths offering t-shirts, frisbees and other free items in exchange for signing up for a credit card offer were ubiquitous on college campuses across the country. With the passage of the Credit Card Act two years ago, credit card companies face more restrictions in offering credit cards to students, giving parents more input and control on how much and what type of credit card offers their college aged children can accept.

This decision can be difficult. Many parents might be tempted to reject the idea of allowing their child to have a credit card at all, but there are many compelling reasons to allow it as well as a number of options to the traditional credit card system.

Why A Credit Card Might Be A Good Idea

You don’t want to saddle your child with any more debt than is necessary, but there are some very good reasons why they might need a credit card. The first is that having a credit card on hand is very useful in an emergency. If your child finds herself stranded without cash or in a situation where he or she needs to get home fast, the credit card can be used immediately so your child does not have to wait for you to send money.

Another reason why getting a credit card in your child’s name is a reasonable idea is that using credit wisely can help boost his credit score early. While you might not think your child needs to worry about his or her credit score yet, more and more jobs and even apartments require a thorough credit check and a decent score to even qualify. By letting your child use a credit card, you could be helping him or her build their credit file, opening them up to more opportunities once they graduate and start their adult life.

When a Credit Is Not a Good Idea

You should know your child better than anyone. Before considering the idea of a credit card, you will want to determine if your child has the personality type to handle the responsibility. If your child is the sort of person to spend every dime he or she has, you might want to reconsider the idea. The average college student graduates with over $25,000 in student loan debt. You don’t want to place your child in a situation where he or she owes even more due to mishandling of credit card usage. Also, because the Credit Card Act limited many consumers under the age of 21 to only qualifying with an approved co-signer, like Mom and Dad, you could be on the hook for any credit card debt that your child wracks up.

Alternatives to Credit Cards

If you are not comfortable with the idea of letting your college aged child have a credit card just yet, there are many alternatives that you can offer. The first option would be to give your child a pre-paid debit card. While he or she will not be boosting their credit score by using this, they will still get the convenience of using a credit card without accruing debt and interest fees. In addition, you can see on what and where your child is spending money, so you can offer advice to help your child achieve financial stability. You also control how much your child is spending by only loading a specific amount every month.

Another alternative for credit wary parents is to opt for a secured credit card. These cards are backed by a cash deposit, but still offer the benefit of credit building without the risk that an unsecured credit card entails. Your student can learn how to responsibly manage a credit card, but the card is protected against your child going over the limit or missing a payment.

If you are struggling with debt yourself, you may be reluctant to expose your child to credit cards at such an early age. While the best option for your family depends on your financial situation and the responsibility of your child, rejecting credit cards out of hand might not be the wisest option. Teaching your child to use credit in a responsible manner now, when you can help guide their choices, can prevent them from making huge mistakes when they are out on their own. A credit card can be a valuable teaching tool for your child if used responsibly and with consideration.