Teen Debt
Should Teens and College Students Have Credit Cards?
Young People and Debt
According to a 2006 study, the average twenty-something is over 23,000 dollars in debt. This debt includes student loans, revolving debt (including credit cards), and installment debt (which include auto loans). It must be remembered, however, that these numbers include young people who never went to college, bought a car, or needed a credit card. The average amount young college graduates owe their colleges is actually around 24,000 dollars and is on the rise, and this does not include any other debt they may have come into during their time at school.
Why Most Students Need Credit
It is a fact of college for most students that they will leave with a certain amount of debt for having attended school. It is the hope that the education they received will be enough to get them a job which is lucrative enough to pay off those loans. Regardless, debt is simply part of the young person’s life for the sheer fact that, in order to have the best chance at a lucrative profession, they are forced to purchase something they are incapable of affording – an education. Therefore, credit cards, whether they are needed to pay loan bills or pay for necessities in order to pay the loan bills, are often a requirement for a period of a student’s life. It is best, then, that they have some sort of controlled or at least knowledgeable interaction with credit cards before they are forced to use them.
It’s Still Up to the Parents (for high school students)
Before a child is eighteen, they will need a parent co-signer in order to obtain a credit card in their name. Thus, it is entirely up to the parent as to whether or not the student can have a credit card. There are some things to consider before jumping in though. Co-signing on a student credit card is a risky proposition, because you are essentially saying that your child will exhibit the responsibility and maturity of an adult, and that if he does not, you are responsible for the bill.
There are some options, though, that allow students and their parents a much needed safety net. Instead of a credit card, a student can start a bank account and use a debit card, taking money directly from the account. This will teach them how easy it can be to spend more than is responsible while simultaneously teaching them the responsibility of carrying a card.
After High School
After your child graduates high school, it is common for the parents to yield to his or her desire for complete independence. While there is certainly a benefit to increased independence, both parent and child soon realize that graduating high school does not always mean much in terms of life lessons learned. For this reason, it might be best to take an active role in helping your child choose a credit card. This credit card should have a low limit (500 dollars should be fine) and a low interest rate. If you can find it, a card with no annual fee is also ideal. If your child (who is now, technically, an adult) allows it, also consider signing up for a joint credit card. This can be a sticky situation, but usually an agreement that you will only pay attention to the balance and ignore or make no judgments on the types of purchases made unless the balance exceeds an agreed upon amount will work.
Finally, a family “emergency card” is also an excellent idea. This card would be tucked away, not to be used except in the case of emergency. This is perfect because it not only teaches responsibility, but restraint.
Links for Students
Financial Planning: Kids and Credit Cards
Financial Literacy Facts
Young Money Magazine: Your Credit Score
What is a Teen Credit Card?
Tips for Teens
Protecting Your Teen Identity
Teenagers and Credit Cards – Beware
Manage Your Money in College
Five Tips for Opening a Teen Checking Account
College Students and Credit Card Information
Credit CARD Act’s Benefits to Students and Other Young People
Making Credit Cards Work for You
Dos and Don’ts of College Credit Cards
College Credit Card Statistics
Choosing a Credit Card
How to Establish, Use, and Protect Your Credit
Building a Strong Credit Report Record After High School
Money Management: Tips to Get Started
Using Your Credit Cards Wisely
Credit Card Tips for Every Stage of Life
Links for Parents
For Parents: How to Teach Your Teen About Money
Is Your Teen Ready?
Tips for Your Credit-Smart Teen
Do Teens Know the Basics of Personal Finance
Prepare Your Teens to Avoid Bad Credit
