FACT: Nearly two-thirds of college students have at least one credit card in their name.
What does it tell you as a parent? Your child is going to have at least one credit card – sooner or later.
So why not prepare him the best ways to use credit cards before he leaves for college.
Here’s what you can do:
- Set a good example of how you handle credit. Your child will learn from you. Use credit cards responsibly and pay on time.
- Owing money to credit card companies is not a fun thing to do due to high interest rates. Educate your child that it’s important to pay bills in full.
- When apply for a credit card, advice your child what key features to look for: low interest rates charges (also known as APR or "annual percentage rate"), zero or low annual fees, grace period before interest rates are charged, gift redemption, etc.
- If you think normal credit cards are too risky, consider using prepaid credit cards. These cards are issued by major retailers and the child can use the card anywhere Mastercard or Visa is accepted. At least by using prepaid credit cards, you can control how much your child spends because you can only spend what you have in the account.
- Lay down the rules, such as setting a limit of how much your child can spend in total. Any excess will be born by him.
- At the beginning, you can start off with a credit card tied to your account. You can see the charges and jump in if there’s a red flag.
- Tell your kid that the use of credit cards is limited by how much your have in cash. If you can’t afford to make a purchase in cash, don’t spend it on credit. Charge only what you can afford to pay back.
- Immediately report to card issuer when the card is missing or stolen.
- Go through each transaction with your child when credit card statement is received. Call the issuer to verify if you see suspicious items.
- Keep transaction slips to prevent them from getting into the wrong hands (read: thieves). Also for future reference.