Recently, college students were offered credit cards on campus and thus often get into debt before actually earning an income. Although, now there is a Card Act of 2009 that no longer allows credit card issuers to advertise or promote their products and services on campus. Anyway, students still face potential pitfalls. The thing is every teen thinks that he or she needs a credit card just as well as a cell phone. So, it is a smart move for any parent to use these ubiquitous devices as teaching tools meaning that they should be monitored while explaining how valuable credit may be. And this will help to protect teens from abusing credit.
The following tips will help you to get started.
Check the teen’s credit report together.
It is not a secret that you can simply do this online. At first there should be no credit. Parents should explain that the use of the credit card will be reported to the major credit bureaus, thus any late payment will stay on the credit report for seven years. Teens should know and understand that credit reports are very important and they affect the cost of loans, mortgages, auto insurance as well as it impacts the decision of a potential employer or a landlord.
Parents can add a teen to their cards as an authorized user.
It can be useful to open a new account together with a teen. Just use a low credit limit and set up an online access to monitor spending.
Parents can consider student credit cards.
They are now offered by the major card issuers. They are provided with rewards including free FICO scores.
Secure credit card can be a good alternative.
These cards require a savings deposit in the bank that issues a card. So the credit limit is actually the amount of the deposit. Thus, teens can start building a good credit report while using the card regularly as well as paying on time and in full, of course.
There is a special card that is built for parents and teens – VisaBuxx.
It’s linked to the account of the parent and both (teens and parents) can monitor all the transactions online. Besides, this credit card can be automatically refilled if there is no money.
The point is parents and students (or teens) should cooperate. Credit cards are the first steps for any teen to start managing his own financial life. Parents should be patient. Don’t bail your teen up when he had reached his credit limit. Everyone makes mistakes and there are actually a lot of adults who fail with their credit and budget management. Let him consider a part-time job to get some extra cash for paying down the balance. Talk to your kid and explain the major points. Monitor his spending together and stay patient while paying attention to his mistakes. The truth is the earlier teens learn those financial lessons, the easier time they will have in their future life.