Off to School and Into Debt

Student credit cards can be a lifesaver for children away from home and can also drown them in debt. Learning to manage credit is an important part of growing up and some students handle it more responsibly than others. Here are some tips to insure your student makes top grades in credit.

Read the application and understand the terms the credit card offers. Some cards offer a 0% interest rate for the first six months and then make up for it later with high rates. If the student pays off the bill every month this isn't a problem, but if the student carries a balance those high interest rates can add up quickly. Students also need to be aware that only paying the minimum payment due is in the credit card company's best interest not their own. With high interest rates and low minimum payments the student can in effect end up paying double what an item cost

Don't use the credit card for everyday expenses, pay cash. Charging lunch even a couple of times a week can build a balance up quickly. Save the credit card for when you must use it, for emergencies, or to spread the purchase of, say, text books out over the entire semester.

Instead of a traditional credit card start out with a secured credit card. The limit can be as low as $500. Knowing there is a limit can be helpful. A guardian or parent sometimes has to sign for these cards.

If you're not sure whether your student can handle credit, obtain a card with their name on it with one of the parent's accounts. Have the student call the parent each time they need to use the card. This will teach the student when it's appropriate to use a credit card and when it's not. It also provides a credit card for emergencies.

A credit card granted solely on the student's application, as opposed to a parent's, is the basis for building the student's credit history. It's tempting to abuse a credit card because it doesn't seem like real money. When writing checks the balance stares you in the face but not so with a credit card. Many times the student won't even realize the amount of charges until the bill arrives and it's heart failure time. Students often don't realize by not paying the bill on time, or even skipping a month's payment because they're short on cash, affects their ability to buy a car or even a home in the future.

Using credit wisely is a lesson every student needs to learn.

Dee Power