As a new class of high school grads prepares to start college, parents and students are faced with a long list of to-dos before the fall. Somewhere between buying linens and selecting a meal plan, students should strongly consider applying for a new credit card.
Why it makes sense to start college with a credit card
It used to be common for college students to be barraged with offers for new credit cards, which often lead to both debt and credit issues. The problem was so bad that several protections for college students were written into the CARD Act of 2009, including a prohibition of on-campus solicitations by card issuers. And in the wake of the Great Recession, many college students decided to simply avoid credit altogether.
But there are several problems with this trend. First, college students often lack a secure and convenient form of payment, which comes in really handy when you’re living on your own for the first time. But more importantly, students who avoid credit cards miss out on a great opportunity to learn how to use credit responsibly. Also, when students avoid credit, they’ll graduate without the credit history they’ll need to get a car loan or a home mortgage, and they won’t be approved for a competitive credit card when they eventually want one. And although rewards shouldn’t be a big consideration when you get your first credit card, you can’t discount the missed opportunity to earn some cash back during college.
What responsible credit card use looks like in college
I’ve been studying the credit card industry and writing about it since 2008, but obviously I wasn’t always a credit card expert. What I did have going for me were parents who used their credit cards responsibly and took a strong interest in teaching me to do so as well.
Even before college, I was made an authorized user on one of my parents accounts, and given strict limits on how and when I was permitted to use the card. When I made discretionary purchases, I was required to pay my parents back every month. This taught me that credit cards weren’t a magic device that could be used to avoid paying for your purchases.
Once in college, I was encouraged to open up my own account, and my parents monitored my spending each month. I was strictly required to avoid both debt and interest charges by paying my balance on time and in full, every month. I even recall being annoyed by my mother’s constant reminders to never carry a balance, but I’m now grateful for her sound advice.
Today, it’s far easier for students to manage their accounts online or through the card issuer’s mobile app. Likewise, it’s a snap for parents to help students when they have access to their account information.
Where to begin with student credit cards
As it was when I was in high school and college, a good first step for parents is to make their student an authorized user on one of their accounts, while setting strict ground rules for its use. Once you’ve had some experience with that arrangement, there are several excellent student credit cards available. Among my favorites are:
Students leaving home for the first time are in for a broad range of new experiences and responsibilities. When students and their parents work together to learn responsible credit card use in college, the benefits of acquiring these habits will last a lifetime.