The Wisdom of Obtaining A Student Credit Card

October 2, 2006

For some parents, the idea of entrusting their adult child with a credit card while they are off working toward their university degree sounds like pure madness. Certainly, there must be a better way to make sure that your child’s needs are met while they are away from you, right? Well, if you are worried about your ace student running up debt while they are in school, then that is a valid concern. However, what better time is there to learn how to manage one’s personal finances than when going to school? There is wisdom in obtaining a student credit card; you just need to see the big picture and establish some ground rules before your student applies for one.

Many parents cringe when they send their adult children off to college. If your child has a tendency to be irresponsible, then college can either fuel that irresponsibility or teach your child how to grow up in a hurry. Unfortunately, it isn’t always clear how your child will respond to being “free” until you drop them off at their dorm and head back home.

A student credit card could possibly be dangerous for your student if they do not fully understand the responsibility of managing their personal finances. So, this is where you come in -- before your child applies for a student credit card you must discuss several things first including:

Will the card be in your child’s name only or will you be co-signatory? With the former option, you will not have any control over your student’s spending, therefore it is imperative that you tell him how managing his credit now can impact him after he leaves school. That is, any credit problems that come up due to his irresponsibility can keep him from buying a car, a home, even securing a job once he enters the “real world.”

If you are co-signatory on the card then you can keep a lid on his spending and check his statement out each month. With the latter option he will not be able to build up credit on his own, thus a student credit card issued only in the student’s name will help him establish a personal credit history.

Will the card be used for every day purchases, emergencies, or something in between? You probably don’t want to encourage your daughter to fund dorm-wide Friday night pizza parties with her student credit card, but you may think it a great idea to have the card on hand for book purchases and for emergencies. A student credit card can help you come tax time too as all of the deductible expenses related to attending university are listed on each statement. Moreover, if your daughter has an emergency she can use the card to pay for automotive towing, a trip to the optician to replace broken eyeglasses, or to catch a bus ride home for the Thanksgiving break. No need to worry about paying for the expense of wiring money; a student credit card has your daughter covered!

If your son or daughter shows plenty of responsibility with their card it can only help them later on in life. Yes, there is a potential debt issue involved, but if you are paying tens of thousands of dollars per year for tuition, then that expense pales in comparison. Most student credit cards offer only a small credit line starting at $500 on up, so the concern about taking on massive credit card debt is overblown. In addition, you can always tell the credit card company that you want to keep the credit limit down – just because they may offer a $10,000 credit line does not mean you must take it.

Ultimately, a student credit card can be a wise choice for university families. With a student credit card there is no need to worry about your child carrying around a wad of cash or wondering how they will handle an emergency when you are not around. A student credit card can offer the security and peace of mind that everyone needs when your adult child is hundreds of miles away from home and unable to turn to Mom and Dad for immediate help.

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