Back to School: Credit Strategies for College Kids and Adults Alike
This is the time of year your soon-to-be high
school graduate is probably making some decisions about university or college—if not what to study, at least where. For many, it may be the first time away from home, the first time they are forced to pick up after themselves or do their own laundry. It’s also a moment when many parents decide to give their child a credit card for the first time, or co-sign for one. You want to make sure your child learns to use credit safely and responsibly. After all, this is the first step on the road toward building a healthy credit score that could someday lead to buying a car or a house. Though it may be hard to imagine your youngster someday buying a house, by covering a few credit basics, you help to ensure he or she starts out on the right path—and perhaps is less likely to make costly mistakes!
If you know college kids who have time to go shopping, it might mean they’re not studying enough! That’s where credit cards come in—offering the convenience of online shopping as well as the opportunity to start creating a sound credit history. If you’re the one who’s paying the bills later, credit cards give you (or the student) a way to track and protect those purchases, as well as financial resources in an emergency. In the last few years, there has been no shortage of sign-up opportunities as credit card companies are a staple on campuses across the country.
A little guidance goes a long way
Beginning credit customers may need guidance; they might not realize that bills not paid in full result in something called “finance charges,” and credit is best used as a valued resource, not a way of life (Spring Break doesn’t count as an “emergency”).
It’s easy, when spending “plastic,” for youngsters to lose sight of the fact that this is real money which will result in actual bills, especially when you haven’t yet had the experience of paying down a credit card balance month after month for purchases you made so long ago you forgot what they were.
Part of learning how to handle credit should also be awareness of cash advance and annual fees. And, just as it would be with any cardholder, a comparison between cards based on rates, fees and possible rewards is essential before opening any accounts. Cards that offer rewards such as airline miles, cash back or discounts might be useful for some students—why shouldn’t they spend Spring Break somewhere sunny and warm, as long as they’re paying for it themselves—provided they’re not paying too much to accumulate those “rewards.”
Set a good example
Children always learn, of course, by example, so if your credit use is healthy you’ve given your students a great model to follow. Remember though, that sometimes mistakes are the best teachers. So if your child does make some minor credit slip-ups in the beginning (note emphasis on minor), it’s
better now, especially while you’re still in the picture and the amounts (we hope) are small. Treat it as a learning opportunity.
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