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Kids And Money: Should Your Kid Apply For A Credit Card While In College?

By Erik Folgate

Many parents will be sending their kids off to college in the coming weeks, and the issue of credit cards always comes up. Parents don’t want their kids to be high and dry if they need an emergency car repair or have a medical issue. For many college freshman, it is a rite of passage to apply for their first credit card and swipe the card for the first time. It makes them feel like a responsible adult, because they are using credit. This is a load of garbage, and it’s exactly what credit card companies want young people to think. Credit card companies have done a superb job at making credit cards feel like a status symbol. That’s why they use words like “gold” and “platinum”.

Blake Thompson, the sound engineer for the Dave Ramsey radio show, posted this on Twitter and Facebook today:

64% of college students have credit cards, half do not know the annual percentage (APR) of the credit card they use most, and 42% of freshmen are credit card dependent. – Center of Economics in Washington

64% of college students have credit cards, and 100% of them can’t afford to pay them off! Don’t we see the problem with that? Credit card companies are extending credit to students who generally have no income. They might have jobs, but it’s only enough money to live on, not pay off credit card balances every month.

What About Emergencies?

There is too much temptation for a broke college student to have a credit card sitting in their pocket. No matter how responsible they are, they’ll end up using it once for something that’s not an emergency, and then it’s downhill from there. If you are worried about emergencies and you want to give your kid a real graduation gift, open up a high-yield, online savings account for them with $500 to $1,000 in it. Don’t tell them the username and password. If they have an emergency, you’ll have the money sitting there to help pay for the emergency.

What about building credit?

For what? Buying a new car after college that they can’t afford? Teach your kids to save money instead of relying on credit. What about buying a house? You don’t need to screw around with a credit card to get accepted for a mortgage. If your kid lands a great job out of school, has no debt, and he or she can prove that they paid their rent on time for four years, they’ll have no problem getting a mortgage loan from a company that does manual underwriting. Lenders that mindlessly look at credit scores to approve loans are the ones that go out of business.

What If I Co-Sign For The Credit Card?

Sure, if you feel like paying for another credit card balance and/or ruining your credit. I know your kid is really responsible, but this is a whole different ball game. It’s college. Kids do a bunch of stupid stuff, their mind isn’t focused on paying minimum payments for a credit card, and there are so many opportunities to spend money in college. One night out could easily be a $100 down the drain. Don’t ever co-sign for your kid’s credit card. You’ll end up ruining your own credit.

You may disagree with my stance on this issue, but please think before you encourage your kids to get credit cards while in college. They don’t have the resources to manage a credit card responsibly, and they end up coming out of college with $10,000 in credit card debt. It happened to me, and I will do and say everything I can to stop other college freshman from getting wrapped up with credit cards.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • Ethan

    How do you feel about University Administration that let’s credit card companies set up camp on campuses and give away pita-pit or t-shirts for signing up? As Dave Ramsey said the other day, the University has taken on the Fiduciary responsibility to educate your kids, but they let these vampires on campus to prey on clueless 18 year olds. If you can’t advertise beer on campus you shouldn’t be able to advertise credit cards!

  • http://www.erikfolgate.com Erik

    Yeah, it’s disgusting, and I hate it. University adminstrators sell out their ethical principles just to make a few extra bucks from these credit card companies.

    But the more sad thing to me is how many kids they lure in for a free t-shirt or free pizza. Instead of getting so pissed at the decisions these administrators make, we need to continue to help parents educate their kids about personal finance and the dangers of credit cards.

  • http://www.budgetpulse.com Craig

    if you are responsible then you should. The reason is you need to begin to establish credit which will only help you after college. Only get one if you will fully pay it off.

  • Eugene Krabs

    I’m with you on this one. There’s really no need for a college student to have a credit card. Credit cards are not the only way to build a credit, and a pre-pay Visa cards or debit card can handle any electronic transactions available.

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