Credit cards and Students
Students who have a job during the school year or work during breaks may earn enough to qualify for a card on their own. One advantage of having their own card is an ability to start building a credit rating. But they can also do damage if they’re not responsible about making on-time payments.
Even if they qualify on their own, parents may want to monitor their kid’s activity to make sure they’re handling their new credit properly. That can be as easy as sharing the password for the account so both can access the account online, or having paper bills sent home rather than to a school address. Advising a student to set up automatic payments can help keep the account current and avoid dings to a young person’s credit score.
A co-signed account handled properly can also help a student build credit. Another plus is that a parent with a strong credit history may be able to secure a better interest rate on a card than a student can alone. But the co-signer is ultimately responsible for payments if the primary account holder fails to make them. Any problems will hurt the credit scores of both parties, so before taking this step, carefully review the student’s spending habits.
Another option for parents is to add their child’s name as an authorized user on their own credit card. This can be done without applying for new credit, but does pose a danger for an uncontrolled spender. “Even if you trust your child to be responsible with their finances, students can make mistakes,” said Frank of the Center for Responsible Lending.
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