Chip Lupo, Credit Card Writer
One important credit card tip for parents with college students is to help them establish credit as early as possible. One way to do that is to add them as authorized users on your own credit card account before they turn 18. As an authorized user, your child will have a credit card in their own name and access to the card’s credit limit but won’t be responsible for paying the bill.
During their time as an authorized user, it is important to educate your child on the fundamentals of building credit. You can set an example for them by consistently making your payments on time and not maxing out your credit limit.
Credit Card Tips for Parents with College Students
Encourage them to apply for a credit card when they’re eligible.
Once a student turns 18, they’ll be eligible for their own credit card account. If the student has little or no existing credit history, but has an independent income, they should qualify for a student credit card or a secured card. Student cards are designed primarily for college students with limited credit. Secured cards are easier to get and require a security deposit to open the account.
Advise against starting out with too many credit cards.
Credit cards can be great for building credit, but having lots of cards as a student could have the opposite effect. The more credit cards a student has, the more likely they are to overspend and miss payments. Plus, too many credit card applications in a short amount of time could lead to short term credit damage because of the hard inquiry that typically results from an application.
Teach them how to manage their account responsibly.
A history of on-time payments and credit utilization below 30% are essential to building good credit. Paying the balance in full every month also saves you money on interest. On the other hand, late or missed payments and overspending can quickly send a student’s credit score on a downward spiral.
To avoid accidental late payments, consider setting up automatic payments on the account. Autopay will withdraw a specified amount from your linked bank account on a date of your choosing.
Make sure they know they’re liable for all charges on their account.
Emphasize that they shouldn’t let anyone else use their credit card. When you let a friend or relative use your credit card, you’re still on the hook for any purchases they make on your account, regardless of whether they pay you back. It’s your own credit at stake, not theirs, so it’s best to keep your credit card and your friends separate.
Explain why cash advances are a bad idea.
Using your credit card to withdraw cash is one of the most expensive credit card mistakes you can make. You’ll pay a fee, usually 5% of the withdrawal amount, or a flat fee, whichever is greater. As soon as you complete the transaction, daily interest charges kick in at an APR that’s likely higher than your regular rate. Interest charges will continue to mount every day until you pay off the balance in full.
Sign them up for WalletHub.
Parents with college students should consider signing them up for a free WalletHub account to enhance their credit-building efforts. They’ll receive free daily credit score updates and a personalized credit analysis that cites areas to improve upon and what steps to take.
People also ask
Did we answer your question?