Is your college student ready for a credit card? The Wild West days of giving credit cards to any college student with a pulse may be over, but that doesn’t mean that students can’t get into big trouble with credit cards.  The good news is that ever since the Credit CARD Act of 2009, responsible credit card practices have increased.  The CreditCARD Act of 2009 requires consumers under the age of 21 to verify that they have income or they must have a co-signer to get a credit card.   According to a 2008 study, one in four students leave college more than $5,000 in credit card debt.  In a 2015 study, pointed out that the average credit card debt for a 22-year-old college student was $1,013.

According to a survey conducted by Sallie Mae, 85 percent of college students have debit cards and only 56% have credit cards.  Is that 56% percent ready to take on the responsibility of a credit card?  As with any decision in life, it’s best to weigh the pros and cons before making your decision.

How To Talk To College Student About Credit Cards

how to talk to a college student about credit cards

Advantages and Disadvantages of College Student Credit Cards

First let’s look at the benefits of a college student getting a credit card.  Learning to use a credit card can set your child up for a lifetime of fiscal responsibility. They will need to keep track of how much they are spending each month, make sure they have enough money in the bank to pay off their credit card, understand how interest rates work, and start to build good credit at a young age.  So when the time comes to take out an auto loan or some other kind of loan, they have a history of good credit under their belt.  Also, for parents and student alike, a credit card can offer peace of mind in case of an emergency

However, the lure of all that credit and cash advances can be all too tempting for a college student out on their own for the first time.  The APR on those cash advances is often upward of 25% APR.  If the student falls behind on payments, then in no time their debt can snowball with interest payments and late fees.  Not to mention a damaged credit score that could take years to repair. Unlike student loans, there are no forbearances, deferments or forgiveness with credit card debt.  A balance on a credit card is essentially a loan that you must pay back.  College student are often roped in with introductory promotional offers.  Those promotions will end at some point, so the student needs to make sure to read the fine print.


What Kind of Credit Card Should a College Student Get?

Be sure to do your research, as credit card offers vary greatly.  The credit card companies who directly solicit to college students are not necessarily the one you should go with by any means.  Many credit card companies have cards specifically designed for college students. NerdWallet offers a pretty comprehensive comparison of college student credit card offers.  Some credit card companies offer benefits such as signing reward bonuses, cash back rewards, good grade rewards, and “Freeze it” programs that offer an on/off switch to prevent new purchases, cash advances and balance transfers.


Advice for New College Student Credit Card Holders

If you’ve made the decision to allow your college student to get a credit card, be sure to have a thorough discussion with them on the particulars of being a credit card holder. First and foremost, a new credit card user needs to read all the fine print.  They need to know when the promotional rates will expire.  Most student credit cards offer 0% intro APR for 6-12 months then the rate jumps to 13-23%.  Encourage your child to always pay off the full amount due on time if they can, keep track of how much they’re putting on their credit card, let them know their credit limit will increase with on-time payments of the balance owed, and make sure they understand that they will be charged interest if they do carry a balance. Making only the minimum payment will be very costly in the long run. 

With the escalating rate of student loan debt, the last thing your college student needs is the burden of credit card debt upon graduation.  Parents should prepare their children for the considerable responsibility of being a credit card holder.  It can make or break their financial future.  Irresponsible credit card habits can also be a huge financial downfall for parents, as they are cosigners and responsible for the credit card debt.

Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego, CA. For more information, please contact Daniel Gamez at 858-217-5051, or use our online contact form. Stay updated with the latest debt relief tips by following on Facebook and Twitter!