Should You Send Your Kids To College With A Student Credit Card?
If you wish to build your credit and take your credit score to enviable levels, it’s always better to start soon. In case a student carries a credit card along to college, that will surely help them build a good credit score. At the time of leaving college, they can boast of having a credit history of four years.
That’s a substantial period. This will help them get a home loan or a car loan on terms that will suit them. Of course, there are a lot of advantages. However, the downsides that come with getting a credit card for students are many. The following points will discuss whether you should send your kids to college with a student credit card.
Make Your Kid An Authorized User First
You can get a physical card for your kid that will have their name printed on them. However, make sure that you link it to your credit card account. This implies that you will be the main cardholder while the student will be the authorized user. Even if the authorized user does the spending via the credit card, only you will be making the payments.
So, consider all the clauses before you make the student an authorized user of your card. When you allow your kids to use your credit card with a credit limit of $20,000, you are providing them a cash amount of $20,000. Therefore, parents must pin their faith on their ability to handle money wisely. If you want, you can talk to your bank’s credit card department to know more about student credit cards and the terms and conditions for using one.
How To Minimize The Financial Risk?
As an authorized user, the student becomes responsible for the credit history. You need to take a few steps to cut down the risks that come along when you authorize a student to use your credit card. Make sure that you add them only if the credit account has a good track record. If your account displays late payments, then those will display in the student’s credit report.
When you add a student as an authorized user of your credit card, make it a point to bring the credit limit down. Please open a new account before you give them the authority to use your credit card. Always use a separate account than your business or main savings account. This way, even if your kid falls prey to phishing, you both can have a plan B.
Students Have A Secured Card
For students aged 21 and above, laying their hands on a credit card becomes easy, even though they don’t have any personal income. Credit cards that are secured can help anyone use a card. Students may have the eligibility to get a secured credit card in their name when they are 18 years of age. The most important fact is that you can get a payment history report through secured credit cards.
These cards offer several benefits and pave the way for students to build an impressive credit history during their time in school. Two of these cards offer a credit limit of $200 instead of a deposit that can be anywhere between $49 and $200. The pro of this is that students can attain the eligibility by themselves. As a result, their way of using the account wouldn’t hurt their parents’ credit scores.
The Downsides Of Kids Using Credit Cards
You would need to deposit to open an account. Therefore, it becomes tough for the parents to keep track of how they handle credit cards while making purchases. They won’t be able to check if the bill payment happens within the stipulated time.
As discussed before, among all the fine prints of the available secured cards currently available, two require you to deposit a minimum amount of money. Also, you wouldn’t have to shell out the maintenance fees every month or every year.
Handing over a credit card to a student is risky, especially if their parents own the card. This is the reason why a secured credit card serves the best purpose. While it lowers the financial risks, it also helps the students build their credit history. And with that, it helps them become financially responsible too before they graduate from college.
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