Giving your college-bound child a credit card might not be a bad idea

Published April 17, 2014

Hand hold credit card

Credit cards are the fastest way to build a good credit rating and can also help your child to take responsibility for their finances. The most important thing to stress to your child is that they must keep up with repayments and not to borrow more than they can afford to repay.

Having a healthy attitude to money can prepare your child for the adult world and hold them in good stead through their adult life.

Having financial responsibility also prepares them for when they reach the workforce and have to juggle household bills and living expenses. Quite often creditors only allow a small amount of credit to new credit card holders and this will allow your child to prove to the lender that they are responsible with their cash flow, so that when the time comes and they actually need to have a larger credit limit, such as the transition from student to first pay check, the lender will be happy to provide this.

Having a good credit rating from a credit card can allow the borrowers credit profile to rise. Starting with a lower credit amount has the benefit that you can monitor their usage without them getting too far into debt.

It can be hard for someone under the age of 21 without a verified income to get their first card, but if you open a card as a joint account holder this will allow your child the first step on the ladder, alternatively you could allow your child to be an authorized user on one of your own existing credit cards, this also provides your child the benefit of your credit history as it will be added to their profile.

A further option is to get a secured card via a credit union, although this will not build up their credit score as efficiently as the other methods due to the credit unions not reporting this to all three credit agencies.

There is a good choice of student credit cards to choose from and it is worth exploring the additional benefits available such as reward points and introductory 0% APR. The below links provides some examples.

http://www.dailymarkets.com/student-credit-cards/

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