College Kids & Responsible Credit Card Use

The college years are a great time to begin building solid credit card practices, but excessive usage can lead to substantial debt problems. With college students being tempted by slick credit card offers, what are parents to do? Teaching card responsibility early on is a proactive step in the right direction.  Here are a few suggestions on how to encourage your kid to responsibly use credit cards.

Usage: …establish usage guidelines before the card is obtained, such as usage for emergencies or necessary items only.  Guidelines help your child avoid wasteful spending.  Also, maintaining control over the monthly statements helps you monitor whether or not wasteful or excessive spending is occurring.

Number of Cards: …stick with one credit card only.  Kids with more than one credit card are more likely to incur personal debt unnecessarily.  The more cards they have, the more likely each will carry a balance. 

Prepaid Stored-Value Cards: …parents determine the initial amount of the card by the amount of dollars they invest. As the child uses the card, parents can “reload” the value of the card. This unique card helps parents track where and how their money is being used and enables the child to see the credit card value as real money that has to come from somewhere.  This type of card contrasts to the debt-encouraging vision some kids have that credit cards are invisible, free money.

These are a great precursor to an actual credit card. However, once your child has shown card responsibility, it would be best to help them apply for an actual credit card so that they may begin to establish a credit history. Prepaid cards do not report payments to credit bureaus.

Walk the Talk: …kids learn better when they see what they are taught actually working in real life. Sometimes words go in one ear and out the other, but seeing the day-to-day reality helps drive the point home. The best example of careful credit handling for your kids is for them to see and watch you doing just that.  So, when it comes to teaching responsible credit card usage, it is wise to throw out the old saying, “do as I say, not as I do.”

Establishing credit is an important part of life. Establishing good credit can make life choices easier to make and open up more financial options.  College kids freshly exposed to the credit cards can either learn to manage them wisely and establish good credit, or face a burden of debt that may take years to pay off.  The earlier kids are taught, and shown, responsible card use, the better chance they have of making wise credit decisions in the future.