Credit Cards For College Students?

Sending kids off to college isn’t easy. Even though you think it’s time for your child to experience life on their own, you know they’ll still depend on you for some financial support. One of the biggest questions you’ll struggle with is the whole credit card dilemma.

Is it really the right thing to do to turn your teen into a credit-card-carrying adult with no strings attached? Not so long ago, new college students were inundated with credit card applications and could easily apply for and receive a card without their parents even knowing about it.

However, this situation changed dramatically after the passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This act made it more difficult for a student under 21 to get a credit card without his parents’ approval.

Consider these points when pondering whether your college student might do well with a credit card:

1. Has he had any money management experience? Perhaps you’ve let him use one of your cards in the past. Maybe he received an allowance or worked at a part-time job during high school. These things teach your child about money-how to get it, save it, and use it as he’s maturing.

* By the time he’s ready for college, you’ll know how he’s handled money in the past. Use that info when deciding whether he should go off to school with his own credit card.

2. How does your college student handle receiving, budgeting, and spending money? By now, you have a decent idea about how your son or daughter approaches the whole money thing. Does he spend every cent right away or carefully save a certain percentage?

3. What are the college’s arrangements for payments of dorm and meal costs? These facts can play a major role in the credit card decision.

* If your kid will be living in a dorm, room and board is usually required to be paid in a lump sum beforehand, which you could do.

* Most colleges now have a meal card arrangement, which means each dorm dweller is provided with a meal card that’s scanned to “pay for” meals. So, no credit card is really necessary.

4. Think about making your college student an authorized user on your credit card account. A card is issued on your account in the student’s name. Your monthly statement will show your child’s purchases.

* Designating your college student as an authorized user on your card account is great because you can set the monthly limit on his card. Some credit-card-issuing institutions even allow you to change your student’s monthly limits as you like.

* For example, if you know next semester’s dorm charges are due in December, you can bump up the monthly limit for December to $2,000 or whatever’s required. Otherwise, select a lower monthly limit.

* Handling the credit card dilemma by making your child an authorized user on your account gives your student a chance to show his financial chops while you monitor and control the amount available for his spending.

5. Consider a secured credit card. Especially good for college students, a secured credit card account requires a certain amount of collateral be placed on the account, like $300 to $500. This deposit is placed in a low-interest-bearing bond or money market where it will be held up to one year.

* If your student shows he can pay monthly credit card bills on time consistently, he’ll eventually receive back the initial deposit. In essence, your kid is rewarded for responsible, consistent money management skills when using a secured credit card.

Take the above points into account when you’re trying to decide whether your college student would do well with a credit card. If you do, you’ll likely arrive at the best decision for him and for you!

How to Teach Your Teens About Credit Cards

As the world becomes more complicated, you have the responsibility to guide your children the best you can. One of the most trying subjects to teach your kids about is how to appropriately manage money.

More specifically, teenagers develop great interests in the almighty credit card. Credit cards are not to be taken lightly at any age, but especially during adolescence. How can you educate your teens about the use of credit cards?

Strategies To Help Learning To Use Credits Cards Responsibly

1. Ask where the money will come from. Insist your teens know specifically where they’ll get the money to pay off the credit card charge before they charge anything.

2. Encourage responsibility. Explain that your teens are responsible for paying their credit card bill on time. In addition, require them to pay off their credit card balance within 30 days. Discuss how interest charges and other fees work and that paying such fees is like giving away their money for nothing.

* Take care to listen to how your teen takes part in this discussion. If you determine your teen requires more maturity or understanding of the information, avoid giving them a credit card and explain briefly how you arrived at your decision.

3. Consider starting with a limited balance credit card. Have your teenager save money until a certain amount accumulates, like $100.00. Then, accompany them to your banking institution or a store to obtain a pre-paid card for the $100.00.

* Even though your teen paid for the card with their own money, it’s a good idea to tell them to make every effort to stretch out their use of the card. A benefit of this method is that your child saved the money upfront before actually charging items.

* They can, therefore, understand that the credit card balance is tangibly their own hard-earned money. The downside of this method is it may not teach your child the responsibility of charging only what they can pay off within the next month.

4. Provide a credit card to replace weekly allowance. Consider converting their allowance to a monthly credit card balance. This method allows them to learn about credit card management. Consider this example:

* You normally pay your teen $30 cash weekly allowance. When they turn 16, state you’ll now provide a credit card rather than the $30 cash weekly. Explain that they can charge up to $120 per month (4 weeks times $30 equals $120) as you’ll pay up to that amount monthly to cover their credit card purchases.

* Stress that if they charge over $120, they must come up with the difference to pay off any balance over the $120 when the statement arrives.

* If they charge over $120 for the month and are unable to come up with the difference, they must surrender the credit card until they pay you the difference owed (even though you’ll go ahead and pay it off to avoid monthly fees).

* Using this method to teach your teen how to handle credit cards is a helpful lesson in managing their money with limited funds. Your teen learns to limit spending to stay within their means.

Teaching teens how to handle credit cards is challenging. The good news is that if you start early with your kids about how to earn, save and spend money, they’ll easily progress to understanding the above concepts with your help and guidance.

Praise your teens’ efforts when they manage their finances and credit card issues well. You’ll build their confidence for the future when you teach them how to handle credit cards wisely.

Teaching Children To Be Careful With Credit Cards

When children start to drive or go off to college, a credit card often seems like a logical addition to their repertoire. Credit cards are useful things to have for emergencies, after all – in the event that the car breaks down by the side of the road and the side of the road happens to be in the middle of nowhere, a cell phone and a credit card can get your child out of the worst of situations quite easily.

However, when students open up their first cards, generally their minds are focused on one syllable, and one syllable only: spend. The problem with credit cards is that due to the fact that there is not visual passage of money from the customer to the institution, many students forget that plastic is actually money. It’s not uncommon for some college students to end up cutting back on classes in order to fit in a job to cover credit card payments. A large number of students get into serious trouble with credit cards, mostly due to a lack of forethought regarding the subject.

This can all be avoided by taking the time to teach your children about credit cards and the proper use of plastic earlier in life. Yes, it might seem like overkill to try and introduce a five year old to the idea of APR and interest, but there are ways that you can start instructing your children in the use of credit cards years before they come into play.

A great way to do this is to involve your children when using credit cards at a restaurant. Explain to your children what it means to use a credit card, and where the money comes from when the plastic gets swiped. Many children might have a hard time with the concept, so it’s likely something that you’ll have to explain many times before your kids get it in its entirety. But that’s okay – even if little Jimmy doesn’t understand the ins and outs of interest after the first day seeing an American Express card, it doesn’t mean that he won’t eventually understand through repetition.

Restaurants are especially great places to bring up credit card usage because of the tip calculation. Let your children in on the calculation of the tip – tell them the difference between giving a waiter ten percent or twenty, and then invite them to help calculate it with you. You’d be surprised how much of an incentive getting to write on the receipt can be – most kids go crazy for the chance to “be like Mom and Dad” and write in the tip amount on the slip of paper.

So, the next time you’re at the restaurant, bring up the credit card to your kids. This can save you a lot of problems once they go off to college and have plastic of their own!