Harris-Courage & Grady, PLLC
Considerations for College Students and Credit Cards
It’s that time of year when many families are getting ready to send their kids off to college. Most college students rely on their families for some level of financial support. Will you send your student to college with a credit card? College students used to be bombarded by credit card offers, but the 2009 Credit Card Accountability, Responsibility, and Disclosure Act prevents credit card companies from issuing cards to people under age 21 unless they have a co-signer or can demonstrate independent income. That means the decision to get a new college student a credit card really rests with parents.
Think about these ideas when deciding whether to send your student to college with a credit card:
- How does your child manage money? Is your child a “spend-it-all” type, or does she use money responsibly? Does your child know how to save up for a purchase that she can’t afford right away? If your child hasn’t managed money well in the past, then sending her to college with a credit card could be a recipe for disaster. However, if your child has a history of being responsible, a credit card can be a useful tool.
- What would your child buy with a credit card at college? Think about how much use a credit card would get if your child had one. Many schools require prepayment for dorms and meal plans, so your child wouldn’t need a credit card to pay for food or housing. However, if your child will be buying groceries every week, a credit card might be nice for her to have.
- Consider adding your child as an authorized user to your credit card account. Authorized users get their own credit cards that are all linked to the same account and all show up on the same monthly statement. Some credit cards allow a primary cardholder (you) to set limits on the amount that authorized users can spend. Others have the option for you to receive an alert every time an authorized user spends money on the card. If you want your child to have access to your money while at college, this may be a good option. You’ll be able to monitor what she spends, and she’ll have easy access to your money if she needs it.
- Consider helping your child to get a secured credit card. If you don’t want to co-sign on a credit card or don’t have good credit yourself, a secured credit card may be a good option. When your student opens a secured credit account, she’ll make a deposit to that is equal to the amount of credit she’s given. If she wants a $300 credit limit, she’ll need to make a $300 deposit. If the card is canceled, the deposit will be returned. Many secured credit cards can be upgraded to traditional credit cards if payments are made timely. Secured credit cards can be a great way to build a credit score when they are used responsibly.
As a parent, you’ll need to weigh your child’s financial responsibility as well as her needs when deciding whether to send her to college with a credit card. Choose the option that will help your child develop financial skills and set her up for a life of success.