In a few weeks, millions of parents will be saying goodbye to their children as they head off to college for the first time. While your entire family is no doubt on an emotional rollercoaster right now as you prepare for that fateful trip to campus, you all have some important financial decisions to consider. One of the first things to think about is whether your child will have his or her own credit card at school. While it seems like a minor detail, decisions about credit cards can have a long-term impact on your student’s finances. Here are some important things for your whole family to consider relating to college students and credit cards.
College Credit Cards: The Pros
There are several advantages to your college student having a credit card; here are a few of the best ones.
Emergencies Are Covered
If your child has a credit card, he or she will be ready when the unexpected happens. If an emergency arises, such as a car problem that requires costly repairs, or there’s a need to pay immediately for a plane ticket, that credit card will come in handy. Unlike a debit card, which will only allow an account holder to withdraw available funds from a bank account, a credit card will let your child draw as much as is required, up to the available limit.
Establish Good Financial Habits
Your new college student will be living alone for the first time once he or she reports to campus. To succeed in college, and in life, your child will need to be able to shoulder more responsibility, including with money. A great way to help your college student build those important life skills is to have the student manage a credit card account responsibly. Providing oversight as your child uses a credit card, and then pays the balance off each month, can help build lifelong skills that will ensure your student is financially responsible long after graduating college.
Build Credit History
Another advantage of getting your children a credit card as they head off to college is the positive impact that proper credit card use can have on a credit score. Credit history accounts for a significant portion of a FICO score, over a third of the score, actually. Managing a credit card well while in college will help your children build their credit effectively so that they’ll have the credit they need to make important life purchases after they graduate.
The Cons to College Credit Cards
While a credit card can be a good idea for your college student, here are a few reasons you may want to think twice before getting one for your child.
An Unnecessary Burden
College will be a major transition for your entire family, especially your child. Burdening a student with the new responsibility of managing a credit card may add stress on the student as well as you. Attempting to manage another credit card account will involve tracking balances and making payments each month, even when exams or other major school events are occurring. If you all think college life may be challenging enough, a credit card account may not be worth the trouble. Instead, a debit card linked to an account you can easily add money to may make more sense for everyone involved.
Everyone’s Credit May Be at Risk
If your child ends up acting irresponsibly with the credit card – not paying the balance on time and/or racking up large expenses – it could do long-term damage to his or her credit score. Additionally, if you cosigned on the credit card account, your credit could be at risk as well. Thus, before you opt to cosign on your child’s credit card, you may want to gauge the risk you’re willing to assume and consider some alternatives.
Frequently Asked Questions about College Student Credit Cards
Parents definitely have some major financial decisions to consider as their children leave for school this fall. However, if you’re a student preparing for your first semester of college, here are some frequently asked questions about credit cards that you may want to consider.
Can you get a cosigner for your credit card if you’re a college student?
Answer: If you’re a college student with no significant income, having a cosigner may be one of your only options for getting a credit card. In many cases, your parents may have to cosign on the credit card account for you to receive it. However, doing so links their credit to yours. Therefore, failing to manage your credit card account can have a negative impact on your parents’ credit rating.
Is it possible for a college student to get a credit card without a cosigner?
Answer: While getting a credit card in school is possible, thanks to the Credit CARD Act of 2009, your credit card options as a college student will be limited. If your parents or someone else with an income isn’t willing to cosign on your card, you’ll likely be limited to a secured or student credit card. The former requires a cash deposit to use, while the latter has a very low available credit limit.
Can a college credit card be used to build credit?
Answer: Using a credit card while in college is a great way to build credit as you prepare for your adult life. However, to build a positive credit reputation, you’ll have to manage the card properly, as failing to do so may harm your credit.
What can you do if you’re in college and have excessive credit card debt?
Answer: If you’re a college student and have become mired in credit card debt, you should try to get help right away. Consider discussing the issue with your parents if you can. If that isn’t an option, seeking out a trustworthy credit card counselor is a good choice as well. Many credit-counseling services are nonprofits that don’t charge a fee, and they can help you determine the best options you have available for paying off your credit card debt.
How many college students have current credit card debt?
Answer: According to a 2019 study, about 36 percent of college students currently have $1,000 or more in credit card debt. So, if you’re considering getting a credit card while you’re away in school, you should definitely consider the consequences of not managing it properly.
Whether you have a child heading to college in a few weeks, or you’re heading away from home for the first time as a college student, you have many things to consider when it comes to college and credit cards. Consider all the information discussed here, and make the best choices you can to be prepared for those day-to-day financial transactions on campus.