Student credit cards can represent a chance for parents to teach their children to use credit wisely rather than as a way to amass a mountain of debt. Some recent statistics show as many as two out of three teens already have credit cards before graduating from high school, which can spell disaster for young adults who have not yet learned cautious credit habits. It just makes more financial sense to train your child about smart credit card use instead of letting him or her get into financial trouble and mar that so-important credit history by not teaching about the proper way to use and manage credit cards.
As many statistics show, it is more unusual for an older teen or college student to not carry a credit card of some kind. Helping your child get a credit card can be a way for you to keep track of spending as well as teach financial responsibility. Some parents have found some interesting ways to use the plastic as teaching tools for their children. Some use credit cards or re-loadable pre-paid debit cards to pay allowance, fund the seasonal clothing and schools supplies shopping trips, and to purchase school text books or dorm supplies. The key to this is insisting that you are given a copy of the account statement and set definite spending limits and rules for your child to follow.
Student credit cards are designed for the young borrower in mind and so they come with features that will make getting into financial trouble more difficult (although not impossible). Almost all student credit cards require a parent or guardian as co-signer and come with lower credit limits. A potential drawback is that they almost never have low interest rates. However, if you teach your child to pay off his or her debt each month, this will not become a problem.
Credit can be a hard concept for teens and young adults to grasp and the media does little to do more than encourage spending. An early introduction to credit can be a good way to counteract the messages prevalent in the media about credit. This can be the best defense you give your child against the time when he or she will be faced with the virtual flood of credit card offers that will appear even before your child turns 18.
There is definitely good news about student credit cards: as the number of student credit cards have increased, the balances held on those cards have decreased, meaning students are learning earlier about the right way to use credit.
Plastic is quickly replacing cash as king and teaching your children to handle credit while they are still at home only makes sound financial sense. It will be a major factor in the rest your childs life and allowing your child to learn to use credit wisely while still at home may be one of the best way to prepare him or her for adult life.