Why Your College Student Should Have A Credit Card
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Why Your College Student Should Have a Credit Card
As a parent, you might be inundated with advice cautioning against giving college students access to credit cards. While these concerns are valid and will be discussed later, there are compelling reasons to consider helping your child acquire a credit card before heading to college. Here are several benefits to keep in mind.
They’re Going to Get One Anyway
Research indicates that up to 92% of college students possess at least one credit card by their sophomore year. Many of these students apply for cards from unsolicited offers without comparing options. By being proactive, you can guide your child in choosing a card with lower rates and reasonable spending limits, while also educating them on handling credit responsibly.
Building a Credit History
After college, your child will need to establish credit for vital life steps like securing an auto loan or mortgage. Building a credit history during college can significantly enhance their chances of loan approval with better rates. Establishing good credit early also reduces the likelihood of needing a co-signer in the future.
Learning About Credit Before Adulthood
Unfortunately, many high schools do not teach financial literacy skills such as budgeting and financial planning. Many parents struggle to fill this gap. Allowing your child to have a credit card with a small limit in college provides a controlled environment for learning these crucial skills, especially if you co-sign and monitor the account.
Budgeting Skills
College students often lose track of where their money goes, especially with cash transactions. Using a credit card for expenses and settling the balance monthly can help your child understand spending habits and the importance of living within a budget.
Convenience for Online Purchases
College students can save significantly by purchasing textbooks and other essentials online. Most online transactions require a credit card, highlighting its necessity during a time when every penny counts.
Emergencies
Financial emergencies are almost inevitable during college. Having a credit card can provide crucial support, from essential purchases like food to actual emergencies, such as car troubles.
Easier Qualifications as a Student
It's often easier for students to qualify for credit cards. Banks offer student-specific credit cards with lower qualification requirements. Securing a card as a student means less hassle after graduation when the need for credit inevitably arises.
Travel Necessities
If your child attends school away from home, traveling back and forth may require hotel bookings or plane tickets, both of which are much simpler with a credit card.
Addressing Concerns
A common fear among parents is their child accumulating debt and damaging their credit history. While this risk exists, your guidance can mitigate it. Here are ways to manage this concern:
- Set a Low Credit Limit: This allows for necessary uses such as emergencies and travel without the temptation of high spending. You can request a lower limit from the bank if needed.
- Co-sign the Account: Co-signing lets you track spending and manage debt, though it makes you responsible for any dues. Regularly reviewing statements is crucial, a task simplified by online banking.
- Consider Prepaid Cards: Prepaid cards don't build credit history but offer similar benefits without the risk of debt. They also provide flexibility in funding, allowing for contributions from family or as gifts.
- Use Debit Cards: Coupling a checking account with a debit card provides credit card conveniences without the debt risk or prepaid card fees. However, debit cards do not contribute to building a credit history.
By thoughtfully facilitating your child's access to credit, you can equip them with essential financial skills that will serve them well into adulthood.
You can find the original non-AI version of this article here: Why Your College Student Should Have A Credit Card.
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