Credibility: College Kids, Credit Cards, And Avoiding Credit Disaster

Save to notebook Email article Print article More articles

By Mia Bolaris-Forget

College kids are often bogged down with lots of credits, but as of recently none of those will have anything to do with a credit card or credit score.

A recent bill signed into law last year prevents lenders for granting credit cards to anyone under 21 years of age unless they get a parent or guardian to co-sign and/or provide proof of ability to make payments.

The new legislation is geared at preventing young adults from ruining their credit by spending carelessly and incurring debt they are unprepared and unable to pay. Experts note that many young adults who go out into the "real world" without a good credit history find it difficult to transition into adulthood and adult responsibilities because they don't qualify for a car loan, renting an apartment, or even getting a job.

However, despite the restrictions, parents can help their "children" via the following alternatives.

* Include your child to a credit card as an authorized user. Put restrictions on your child about usage, but even when YOU use the card you help your child establish some credit and when he or she uses the card, there is another responsible party (you) to ensure payment.

* You can co-sign a card for your child. This allow your budding young adult to have a card entirely in his or her name....most likely at a lower interest rate than for most full-fledged adults. However, because you are a co-signer you will also receive a monthly statement that can help you monitor or supervise activity. However, spending limits can be increased without your approval. And, keep in mind that if the card is abused or payments are missed, your credit score will be affected and you don't have the right to shut down the account without your child's knowledge or consent. For this reason, many opt to simply add the child to their account as an authorized user....keeping you in control.

* Do your homework. Find out if your youngster is eligible for a card of his or her own based on part time jobs. Typically these cards will have a lower interest rate and a lower spending limit.

* Look into a debit card instead. Using a debit card allows you to keep track of your child's spending. However, a debit card will do nothing for your child's credit history....but it will teach him or her how to handle money. This option may be a good idea for younger tweens and teens helping them prepare for the real thing by the time they are ready for college or the real world.

Long Island Money & Careers Articles > Credibility: College Kids, Credit Cards, And Avoiding Credit Disaster