Many parents toy with the idea of getting their college student a credit card. On one hand, they reason that a credit card can build their student’s score at a young age and give them a head start in life. On the other hand, there’s a chance that the student will spend unnecessarily and accumulate debt.
There are definitely benefits to getting your college student their first credit card. But this doesn’t change the fact that some college students aren’t ready for the responsibility. It can take years to develop a solid credit history, and the sooner your student obtains a credit card, the better. If you’re understandably hesitant, don’t completely dismiss the idea of a credit card. Consider a few tips for getting your college student his first credit card.
1. Give him a crash course in credit management. Some parents mistakenly put a credit card in their child’s hand, but never teach them credit management skills. Don’t assume that your child knows how to manage his finances. The temptation to spend is great in college and credit cards can give your child instant gratification. It’s not uncommon for a young adult to get his first credit card and completely max out the account within a few months.
Make sure your child knows the basics of credit management and the dangers of overspending. Don’t be afraid to set a few ground rules. For example, you can give your student a monthly spending limit — perhaps $50 or $100. Grill him on the importance of paying the balance off each month and only charging what he can afford to pay off. What’s more, sign him up for online account management. This way, he can monitor his balance online and pay his bill before the due date.
2. Be selective in your choice of credit cards. Many types of credit cards are available to college students, and some parents consider prepaid credit cards. These credit cards are safe, but if you want your child to build his credit score in college, a prepaid credit card doesn’t help. In this case, your child needs a credit card from a bank that reports to the three credit bureaus. He can apply for a secured credit card and pay the required security deposit, you can cosign for him to get an unsecured credit card, or you can add him as an authorized user on your credit card.
3. Monitor his credit habits. If your student is new to credit and money management, keep a close eye on his credit card account. Have candid financial discussions. Ask about his amount of debt and whether he’s paying his bill on time. If you cosigned for his credit card or included him as an authorized user on your account, you can sign into your online account to monitor his spending. It’s important that you identify credit problems early. This way, you can steer him back in the right direction and avert serious credit problems in the future.