In this day and age it’s easy to believe that everything revolves around having a good credit score. So you may think that it’s a logical step to allow your college kid to get a credit card, albeit with a little parental guidance here and there!
There are two questions that you need to ask yourself. Firstly, can a college kid get a credit card? It’s certainly true that it’s harder to obtain that small bit of plastic than you may think. The Credit CARD Act of 2009 forbids a bank or financial institution from giving a credit card to someone under the age of 21 unless they have a co-signer or they can prove that they can make the payments from their own income. Easier said than done!
The second question that you need to ask is – is my child ready for their own credit card? This depends on a range of factors which we’ll look at now.
Is your child ready?
They seem to grow up so quickly. One minute they’re learning to walk, the next they’re walking off to study at a college miles away from home. But your little ones will soon be in the world of adulthood, and some adjust to that better than others. So when it comes to getting your college kid a credit card you’ve got to consider their maturity level. If you don’t think they quite understand the complexities of credit and the consequences of their spending do yourself and them a favor. Give them a little more time out there in the ‘real world’ before giving them the responsibility of a credit card and let them start out with a debit card instead.
Regardless of how mature you think your child is, make sure you play it safe and take the time to talk to them about what their financial responsibilities are and how their spending now affects their future. First, make sure that they understand the entire process of making a purchase and paying for it with a credit card. That is:
- the transaction
- the item appearing on the statement
- the interest accrual and
- paying off the debt.
If you seriously want to help your college kid get a credit card make sure that you spend this quality time with them not just lecturing them about money but showing them the intricacies of adult life. This will also help you to assess whether your child is mature enough to understand how to use the credit card to their advantage. The important thing to remember when helping your college kid get a credit card is that their decisions will impact on your own finances just as yours will impact on theirs.
How can you help your child?
Apart from teaching your child about the ins and outs of using a credit card there are other things you need to do to help them out if you feel that they are ready for this financial responsibility. Show them exactly what can happen if you get too far into debt so that they don’t take the matter lightly. Conversely, make sure that they are aware of how building a good credit score can make your future life all the more easier, with access to car loans, mortgages and more.
Now for the nitty gritty. Once you are certain that you’re happy to help your college kid get a credit card you need to help them with the actual application. As with any new account this will involve a lot of research to find which credit card is best for your child, and for you. Avoid high-interest cards or those with unnecessary fees and make sure that you read all of the small print before you sign up to anything – hidden fees can easily be missed by the uninitiated. There are some cards which are designed to help students, so check them out. For example, some give a cashback bonus if their grade-point average is 3.0 or higher (a good incentive to study harder too!)
Once you’ve picked the best credit card, you’ve got to be confident enough put yourself forward as a co-signer, meaning that you’re jointly responsible for the credit card debt. A second option is to add your child onto your own account as a second authorized user with the same joint responsibilities. The difference between the two options is that, if you add your child onto your own account and you have issues with debt then it will affect your child’s credit too. When it comes to helping your college kid get a credit card it really is a joint effort.
A family has to go through many different trials as well as numerous joyous moments. Make sure that your child’s finances falls into the latter!