College Students & Credit Cards: Caution Rules

Did you know that part of the 2009 CARD Act has stipulations for credit card applicants under the age of 21? It’s true; the dynamics are different in that there more than a few strict compliance issues credit card companies must abide by if they market to those under 21, including college students.

It makes no difference that a 20 year old is earning a living, paying rent and insurance: if he’s not yet 21, he’s going to face a few roadblocks because the credit card companies are limited by law. That said, parents are routinely looking for ways to introduce credit cards into their teens’ or young adults‘ lives. The thought process is that by instilling responsibility at a young age, these young people will grow up fiscally responsible – and it’s a good process for parents to incorporate.

There are a few other considerations, too, that parents may or may not be encouraging. This week, we take a look at a few of the cautions that are good practice for anyone, regardless of their age. From secured credit cards to other alternative financing options, the right decisions today can shape a great future.

A Word About Secured Credit Cards

Secured credit cards continue to grow in popularity, as there are more people who are either just getting their credit files started or who may be rebuilding their credit due to tough economic problems in the past. These really are powerful resources and a much-needed addition to the entire financial sector. Many parents are opting for these safer alternatives until they can get those responsible spending habits into place for their offspring.

One fine consideration is found in the Platinum Zero Secured Visa. It has 0% APR, no application fees and no annual fees. Your payment history is reported promptly to all three credit bureaus, making it a great choice for building or rebuilding your credit.

The Temptation of Tuition

Too many times, college students are tempted to put their tuition on their credit cards. It’s a quick solution, but one that can cost you dearly the further you carry your balance. There are other – more affordable – ways to covering those expensive tuition costs. Don’t make it worse by paying high interest rates on a major expense. It’s not the ideal way to get your career or your finances kicked off.

Theft Vulnerabilities

Not only is there a higher percentage of college students who find their dorm rooms plundered through and valuable items, such as computers and credit cards, stolen each year, but the risk of identity theft is also higher for younger adults. These young adults have grown up with the internet their entire lives, unlike their parents, who might have been introduced to the endless possibilities after they were adults.

It’s hard for many young people to believe this, but there was a time in the not so recent past when a cell phone did little more than make a phone call, let alone serve as a credit tool. The internet, in many ways, is still in its infancy – and so are security efforts. It’s important that college students understand the possibility of compromised information – whether it’s stolen information or a stolen credit card.

The Parent Factor

It’s tempting for Mom and Dad to co-sign a credit application; in fact, it’s almost a rite of passage that parents co-sign a credit card application in an effort of helping their teens establish their credit history. As mentioned earlier in this post, there are other alternatives that are just as viable and will serve the same purpose. Secured credit cards are the ideal solution. Remember, that option is always available and it may be that your signature is better served on an automobile loan if necessary a year from now. If handled just right, however, your young adult may have already made great strides with an excellent payment history with his secured credit card.

These are just words of caution, of course, and each family decides the best path. A bit of planning, a healthy dose of reality and a responsible approach ensures your teens and college students have a solid foundation that carries them straight through to their retirement years. That’s the goal for any parent, after all.

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