The Benefits to Parents for Getting their Kid a Student Credit Card
Credit Card (Photo credit: 401(K) 2013)
If you are a parent that has a child in college then there are a lot of things that you probably worry about. Besides getting good grades, hanging out with the right people, and working towards a degree, there are also many financial decisions to think about as well.
College is pretty expensive on its own and that usually doesn’t take into consideration the cost of living and daily expenses as well. But what about after college? You child is supposed to move out on their own with their new degree and start living life as a grown up. But the financial world does not grade people on how well they did in college or how much money they are making when they get out.
Chances are your child will need a credit card or a loan at some point after college. Either for a car or for a home and if they do not have a credit history then they will be knocking at your door again.
Credit Score
The one thing that lenders look at when considering someone for a loan is their credit history. Or in other words how well they have paid off their debts in the past. It doesn’t matter how much these debts were, it is just based on whether they were paid back on time.
And if your child needs a loan and they have no credit history then they will need a cosigner and that will most likely be you. The most simple and easiest way to build credit is with a credit card. It is also the fastest and easiest way to destroy someone’s credit if they are not used responsible. But as we said before, how can they get a credit card with no credit history?
Student Credit Cards
If you have a child in college then they have the ability to apply for a student credit card even though they do not have a credit history. There are plenty of options to choose from and some of these cards even come with rewards for the money that is spent on them. Now before you start thinking “There’s no way I am giving my kid access to a credit card while they are away at college” look at it from a parents point of view.
You probably already send your kid money on a regular basis to buy the things that they need. And they probably have a debit card (or your credit card) that they use to buy these things. Well then why not have them spend the same money that they were going to spend anyway on a credit card of their own and learn some financial responsibility in the process. Student credit cards don’t come with a high spending limit so they cannot get in too much trouble and if they check it like they check their bank account for the money that you send them, they should be able to pay it off each month.
So the only thing that changes is that they are building their credit, while spending your money (which they were going to anyway). Still having trouble with your child having their own credit card? Then just have them pay for their tuition or textbooks with their student credit card and put it away until next semester. Building credit is not about how much you spend, it all about paying back whatever you do spend not matter how much it is.
It’s Never to Early to Start Building Credit
By talking with your kids about finances early and letting them know that their credit score is something that will be with them forever, just like their college degree, it will be saving them and you a lot of money in the future. Getting approved for a loan in the future will depend on their credit history, and how low the interest rate will be will depend on how good their credit score is.
By utilizing a student credit card while they are in college for the purpose of building their credit, they will not only be on their own in the working world when they graduate, they will be financially independent as well.
Matthew Coan is the founder of the financial website Casavvy.com. Which is dedicated to helping people compare credit cards, checking accounts, and savings accounts to save them the most money.
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Category: Credit Cards
