Photo: xjasonrogersx via flickr
So your little angel is all grown up and about to leave home for college.Besides picking up few cases of toilet paper and sheets to fit those oddly shaped dorm beds, you’re thinking about opening up a new line of credit just so your child has a card to carry around in case of an emergency.
While it’s good parenting to make sure your kid always has a piece of plastic in their purse or wallet to bail them out of a tough situation, is trusting your credit score to someone in their late teens – in a town full of shopping outlets – really a good idea? It actually might be.
While you shouldn’t go and sign your kids up for an American Express Platinum Card, there are options on the market that will give them a financial safety net without risking permanent damage to your credit score.
If you’re thinking about signing up for a credit card for your college student, here are some things to consider:
- The Account Has to Be in Your Name. It used to be that if your kid wanted a credit card, they could just apply for one themselves. However, since the CARD act passed in 2009, it’s become virtually impossible for someone under 21 to get a credit card without a co-signer because of the profligate spending that students tend to engage in when they don’t have someone to answer to. Putting your name on the account is actually a good thing, though. Knowing that their parents receive their credit statements is enough to dissuade most students from spending irresponsibly.
- Don’t Give Them A Copy of Your Card. Credit cards for college students can be a good thing, but that doesn’t mean you should give your kid access to your own high-limit, low-interest cash-back card. Even if you trust your children to use the card responsibly, you can’t guarantee that it won’t be lost or stolen – and fraudulent charges are a new headache you just don’t need. Instead, try signing up for a low-limit, no-fee card like the Discover More Student Card, which is designed for student cardholders. The risk is lower, and it won’t cost you anything extra.
- Make Sure the Statements Come to You. Never, under any circumstances, let your college student handle their own balance statements and bills. Since you’re the account’s guarantor, you need to make sure that you see every piece of paper that the card issuer mails out. Even the most well-intentioned students can wind up owing thousands in credit card debt if their spending isn’t monitored.
In many ways, credit cards for college students are a good thing. They’re the most versatile form of currency on the market, and using them responsibly will help a student build up a solid credit score, which they’ll need later in order to apply for home and vehicle loans. But as parents, monitoring your child’s card usage is an important responsibility.
As long as you get them a low-limit card with no membership fees, and as long as you keep a watchful eye on the charges they’re racking up, getting a credit card for your college student is a good move. For your child, it’s a first step on the path to financial responsibility.