Having a credit card has its own advantages and disadvantages. Most of the students are not well aware of the problems that may arise if they don’t handle their cards sensibly. There are some very valid concerns about college students and credit cards, which are discussed later in this article, but there are also many good reasons to motivate parents to help their children obtain a credit card before heading off to college. Here is a list of some of these reasons.
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They’re going to get one anyways
According to a recent survey, almost 92% of college student have at least one credit card by their sophomore year. Out of these 92%, most of the students got their cards by just applying for an offer that they received in the mail, even without comparing the options available to them.
Thus by taking action early, you have a chance to help them find the best credit card with lower rates and a more reasonable spending limit. This will also provide you the opportunity to educate them on the risks of having a credit card.
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Building a credit history
Your child will eventually need credit once he is out of college. If he already has a credit card in college, he can build up his credit history to help him in the future. Building a credit history while in college will prove beneficial when the time comes to apply for an auto loan or a mortgage. Any student who already has a credit history is more likely to be approved for these loans, get better rates, and hopefully won’t need you to cosign for them.
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Learn about credit before adulthood
Unfortunately, many public high schools as well a many parents, don’t spend much time in teaching the students about the basic budgeting and financial planning that they’ll need as adults in the future. This results in most young adults today learning about credit the same way most of us did, the hard way. If you allow your child to have a credit card with a small credit line in college, they can begin to learn these lessons earlier in a more controlled environment, especially if you’re a co-signer who has access to the account.
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They teach budgeting
When dealing with cash, it’s easy to forget what exactly you paid for each month and where did all your money go. By using a credit card for expenses and paying off the bill each month, your kids can keep a track of where all the money is going. They will find out the true cost of eating out and how to live within a budget.
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To make online purchases
Students can use credit cards to do online shopping and can save a fortune by purchasing text books online rather than on campus. They can buy virtually every other item from clothing to furniture, electronics and music in lesser price.
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Emergencies
A credit card can become a blessing in disguise in cases of emergency. By giving your child a credit card, you will be satisfied that he will not be stuck in case of emergency such as when a car breaks down or he runs out of gas away from campus.
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It’s easier to qualify as a student
It’s harder to qualify for a credit card as a young adult out of college as compared to a student in college. Banks offer student credit cards specifically for college student that have lower qualification standards. It is for sure that your child will need a credit card eventually, and it will be much easier to get one now.
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Motels and airlines require one
In case your child is going to school out of town, then it is most likely that they’ll make the trip home once or twice. Without a credit card, it’s next to impossible to make any hotel reservations or buy plane tickets.
Addressing "The Concern"
Most of the parents only have one concern about their children having a credit card, which is that they’ll run up the bill, put themselves in debt and destroy their credit history. Although this does happen in a number of cases, but you should understand that they’re much more likely to do this on their own, and you can help prevent it by guiding them through the process. There are some things you can do to prevent or at least limit this.
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Get a low credit limit
Fixing a low credit limit will allow them what they need for emergencies; online purchases, motels and many of the other benefits listed above, but stop them from accumulating a large amount of debt. You can request for a lower credit limit even if the bank gives you a higher credit limit by default.
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Co-sign for them
It is important that you take the time to review the bill and payments each month. While this option does make you personally responsible for any debt they get into, it also give you access to the account enabling you to monitor their spending. Most of the banks will let you do this online now.
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Get a prepaid credit card
Although a prepaid credit card will not provide the benefits of building a credit history, but it does offer most of the other benefits. In addition, it is possible to replenish them online or by phone to provide an allowance, or allow others to do so as gifts.
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Checking accounts with debit cards
If you get your child a debit card that’s tied to a checking account, your child can have all the conveniences of a credit card without having to worry about getting into debt, or paying the annual fee that usually comes with a prepaid card. However, it does not help in building a credit history.
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