Best Credit Cards for Students in HS & College: How to Pick a Credit Card &Teach Your Student Responsible Use
Your child is leaving home for college where he will have to learn everything from how to register for classes to how to take the pens out of his jeans before putting them in the washer. Consider whether this is the right time for him to learn responsible use of credit along with a thousand other things. Here’s how to send your student out into the world armed with the knowledge that will prevent the kind of credit card abuse that wreaks havoc on credit ratings and can take years to overcome.
The Right Age for Credit Cards for Teens
Young children seeing their parents at the automatic teller believe that all the money you ever need is available at the push of a button. Teenagers, watching their parents use plastic for everything from iTunes to eye exams, but missing the part where the monthly bill is paid, might also think that a credit card is the key to a kingdom of unlimited shoes, video games and tacos. Basic as it seems, the first step toward successful use of credit cards is making sure your teenager understands how they work
According to Assistant Vice President Ryan Mills of Park National Bank a teen is ready for a credit card only when she has completed a personal budget. Students should understand the mechanics of budgets, loans, and interest, and the difference between planned and unexpected expenses, necessities and discretionary spending. Learning to use credit cards responsibly means understanding when and how it is appropriate to use them.
Debit Cards for High School & College Students
Debit cards are a good first step, and according to the ABA (American Bankers Association) Education Foundation Get Smart About Credit Program, 50% of 18 and 19 year olds who use plastic have them. Debit cards are tied into an existing account, and because the cardholder is spending his or her own money, this is a good introduction to the use of plastic without the potential for debt. It is important for parents to realize that while debit cards are a valuable tool for students, they are not borrowing and repaying money so they are not generating a credit history. To do that, your student will need to go to the next step, which could be a low credit limit card,
Secured Credit Cards for Students
The best credit card for a student who has successfully mastered use of a debit card might a secured credit card. This type of card, while not funded with an account like a debit card, is backed up by a deposit at the bank. In the event that the cardholder does not pay her bill, the bank can and will deduct the payment (along with a hefty amount of interest) from the bank account.
Low Credit Limit Cards for Teens
Your best bet, once your teen has proven herself with a debit card, might be a credit card with a low credit limit. Parents should consider setting up a credit account in which they are the primary borrower, with the student as a cardholder on the account. The primary borrower receives the monthly statement and should review these statements and discuss them with the student until he is certain that the cards are being used wisely. Proper procedure for handling a credit card account includes the following:
- Keeping all receipts
- Checking the purchases (receipts) against the statement
- Paying the full amount on time ,every month
Compare Credit Card Rates
Although it should be your student’s goal to maintain a zero balance on his account, one of the best aspects of credit cards is the availability of funds for emergency use. Even the most careful young savers are sometimes faced with transmission repairs and broken bones that will need to be paid for over a series of billing cycles. When applying for a credit card, compare credit card rates, and even if you intend to pay off the balance every month, select a card with a low APR (annual percentage rate, the amount of interest you will pay annually on credit card balances) just in case.
Credit cards, a fact of life in today’s financial world, are easily abused in ways that can take years to overcome. Don’t wait till your student is drowning in credit card debt to teach him responsible use of this helpful financial tool!