Should you get your college student or high school student a credit card?
This is a great debate among parents, financial advisors and the kids! There is probably know right answer, but I’ll share with you my experience.
My wife’s parents got her a credit card at 12 or 13 where they were on the account with her. The limit was $250 and she was only allowed to get certain items on it. Then as she got older - she was able to get the limit raised to $500 as her income grew. Her parents always made her pay it off each month out of her paycheck or allowance. I’m sure if there was a problem with overspending or something they would have had severe consequences. She was able to build credit from an early age due to her parents understanding of what kind of youth she was – smart and capable.
My parents didn’t have that idea and when I was 18 and ready to go into the world – I had no credit and nobody would consider giving me any loan! Which could have been good…but I was a responsible person. I even had to put a deposit on the cell phone I obtained. I had a good job, good money, but nobody trusted me with a loan due to lack of credit.
I ended up getting married at 19 – my wife was 20. She had credit and I didn’t. We went to buy a condo right before we got married. We were approved! Because her parents had helped her understand credit and helped her understand the value of building credit as a student. All she had on her credit – a low limit credit card, a 90 days same as cash purchase for a stereo, and the same on a computer while she was in high school – all paid for by her part time job.
Student credit cards may not be for everyone. Maybe a prepaid debit card or something would be better for some kids – that way when the money runs out – it’s gone for good. The only problem with these is that they might not help build credit. College student credit cards and other credit cards for teens do help build credit in youth.
Some of the best credit card companies have great products where you can get online access to account info so if you want to get your teen or young adult a credit card – you can keep tabs on what’s going on with it. This can give them a headstart with the rat-race. This coupled with sound advice about when to buy a home, having low debt to income ratios, little or no car payment are valuable lessons that no school can teach your child.
