Your College Kid And Credit Cards

Here’s a scenario for you to consider. Your college student starts school and promptly gets a credit card, for obvious reasons. He or she, dazzled by the possibilities of financial independence and a bit overconfident that you will cover for him or her if she ever gets in trouble, starts charging purchases left and right. When the credit card statement comes, either your college student can only afford to pay the minimum, assuming he or she has found a part time job, or can’t afford to pay at all. The result? You will be the one to take care of it. That’s not even the worst part.

What if you can’t pay for that debt yet? The debt then becomes a burden that your college student will have to bear. For the rest of college? No. For the rest of his or her life. And, that little thing called credit score? He or she already got one along with his or her first credit card. Those unpaid balances are going to reflect on the score and, right at the start, the negatives are already piling up.

The above, of course is a theoretical scenario. It could be that you are the parent of a financially responsible college student. Congratulations, by the way. However, consider these statistics. According to student loan company Sallie Mae’s study in 2009, the median student credit card debt is at $1,645. Also one out of five undergraduates carry debts of anywhere from $3,000 to $7,000. Those are sobering numbers, right? Here’s more. Around 84% college students have at least one credit card and half have four or more credit cards. That doesn’t seem so bad until you learn that only 17% of them pay their credit card bills fully every month. The others are revolving their debts every month and paying for interest rates averaging at 14%.

Credit cards do have their benefits. They can be very useful for emergency purchases such as those needed for projects which are very common in college life. They can also be quite handy in real emergencies, such as when your child gets a flat tire or runs out of gas while on the road and is carrying no cash. Credit cards can be very handy and helpful as long as the card holder is financially responsible. Make one mistake, however and the interests will pile up, burying the card holder in debt.

It all boils down to how much you trust your college student’s financial habits. If you can trust them to be always careful of their purchases and keep up with their monthly payments, then by all means, help them get a credit card. If you can’t however, then keep them away from credit cards for as long as you can.