Teaching Your College Student About Credit Cards

Whether your child is about to go to college or is just dreaming about the future, there are probably a few things you need to teach him or her about credit cards. Hopefully none of your kids have put themselves in any serious credit card debt yet; but to keep that from happening as the years go by, they have a lot to learn about the responsibility that goes along with credit cards.

Since the Credit Card Act of 2009, people under 21 need to prove income and/or have a co-signer on their card, making it much harder for teenagers to get their own credit cards—and making it harder for them to get into credit card debt before they have learned how to properly manage their money. Credit cards are very tempting for young adults, especially for those who don’t know the consequences of spending money they don’t have. College students in particular often fall prey to credit cards: Many are going through school with student loans (and hopefully scholarships), but essentially they are living on money they don’t have. They are conditioned to be optimistic about their future and therefore bet on their potential income.  It’s no wonder so many students get caught up in credit debt by the time they graduate.

Kids are rarely (if ever) taught about credit cards in school. If you can’t rely on schools, it is up to you to teach your children. Here are some things that all young adults should know, whether they are college students or still in high school:

Credit card debt should be avoided at all costs.

According to a study done by Sallie Mae, the average college student owes $2,000 – $8,000 to their credit card company. As parents, you should discuss ways to prevent significant credit card debt in order to help prevent future financial stress and lifelong bad habits.

Before your student gets a credit card, as a parent you need to explain the advantages and disadvantages of having a credit card. It is important to go over the penalties that come with bad credit card habits.

Payments need to happen on time, every time.

It is very tempting for new credit card users to not pay on time. They don’t understand the pitfalls of minimum monthly payments and interest rates. It is important for college students to understand that if they are going to use a credit card, they should only spend what they can actually pay back. If your child is carrying a balance, explain how compounding interest adds to the total owed.

Making on-time payments accounts for 35% of a credit score, which ultimately affects your child’s future ability to get loans for a car or dream house. Stress the importance of this to your kids and explain how credit scores work.

But credit cards don’t have to be all bad news! College students have a great opportunity to build an excellent credit score because they are new to credit and therefore have a relatively clean slate. Ideally, kids should be gaining a financial education well before they leave for college. This helps them develop good habits while in the family home with a safety net.

If you are not the best with credit cards yourself but are interested in getting better and ensuring your kids make smarter decisions, try taking a free online course on financial literacy offered by the National Association of Student Financial Aid Administrators. Be sure to share your knowledge with your kids to help make their future a success.


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