Busy college students spend their school years learning all manner of subjects, but unfortunately, responsible credit card use is rarely one of them. Too often, Americans who struggle with credit card debt are merely continuing a habit that they began as college students. Therefore, it is vital that college students learn to use credit cards responsibly before they graduate, in order to begin their working years with the right skills and habits.
For most students, college is an incredibly exciting, fun, and busy time. It is often a period of increased financial stress as young adults are asked to manage their own finances for the first time in their lives. To make matters worse, college students face the ever increasing costs of tuition and expenses while being vulnerable to peer pressure from their classmates.
The solution to these challenges is increased education as well as parental assistance. Parents should explain to their children exactly how credit cards work before they start using them. Students should be strongly advised never to carry a balance, and they should be made to realize how much interest will be incurred if they do. Parent’s next step is to add their child as an authorized user to their account. In this way, parents can monitor their children’s spending before it gets out of control. Parents should then request payment in full from their students for all monthly charges, in order to enforce the direct correlation between spending habits and payment requirements.
Before a student opens up their own credit card account, parents should start teaching personal responsibility and financial skill by asking their children to pay other bills such as those for utilities, cell phones, and student fees. Once the child has demonstrated the habit of consistently paying their bills on time, only then should students be encouraged to open up a credit card account in their own name. When doing so, students would be wise to open up an extremely simple type of credit card without a rewards program, since these incentives can tempt new cardholders to spend more.
Students may also consider applying for a card offered by the same institution that already holds their checking account. This will allow students to monitor their credit card account in the same place that they currently view their checking or savings account balances. Furthermore, when all of their accounts are with the same bank, paying a credit card bill is a simple and instantaneous balance transfer. Finally, students should never, under any circumstances, carry a balance on their credit card in order to pay their tuition bills. Of all of the types of education loans available, credit cards offer the least favorable terms.
By properly educating students about credit cards, and by slowly introducing them to their own accounts, parents can be proud of their children when they graduate with great personal finance habits and no credit card debt.
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