There comes a time in every young person’s life where they reach a milestone of independence and freedom. No, it’s not a driver’s license being handed over – it’s a credit card. 35 percent of college students surveyed in 2012 owned a credit card, and 62 percent reported that they applied for a card before even starting college. Here’s some helpful advice for students and parents as you begin the road to financial independence.
Add your student to an already existing credit card: Adding your student to one of your already existing cards is a good idea for a few reasons. For one, they’ll inherit your good credit rating and be able to build credit in their name. Additionally, it will allow you to monitor their spending habits and ensure that they don’t accidentally get out-of-control.
Set limits, and adjust them accordingly: To help your child ease into being responsible with credit, start by limiting it to certain items. Consider making it an “emergency-only” credit card to begin, to be used for car repairs, accidents, etc. As your student proves their responsibility, consider widening it to “emergencies and school supplies” or “emergencies and necessities.”
Work together to understand the importance of a good credit score: It’s important for both students and parents to talk about why maintaining a good credit history is important. Students, you should know that it can affect your ability to get loans, purchase a home or car, or sign up for utilities, among other things. While some of these things seem far away, the credit you build now can affect your long-term future. Therefore, it’s very important to keep a good credit rating by paying the bills on time and not carrying a large balance from month to month. Not to mention, carrying a large balance will also cause you to pay more in the long run.
Be hyperaware about credit fraud and identity theft: Young adults are often the target of identity thieves, thanks to their clean credit records. Make sure you’re protecting your credit card information by keeping all your personal information private. Don’t give out any information over the phone or online unless it’s through a secure third party. Make sure you log out of any accounts when you’re on a shared or publicly visible computer, and also be sure to shred any personal documents before you toss them out.
For more tips on how to be credit-smart, follow our BBBlog and contact Better Business Bureau of the Upstate.