With the new regulations placed on credit card companies, it is now more difficult for college-bound students to get this flexible option when they leave home. The new regulations state that anybody under the age of 21 must have a co-signer on the contract when they sign up for a new credit card or they must prove that they can make the payments. This is making many parents have to choose between helping their college-aged student get that piece of plastic that is handy in cases of emergency or if they will send them off without one.
The choice boils down to this: Will the student enter the real world with an understanding of how credit works or will they charge up a huge mountain of debt and cause damage to their credit and the parents’ credit as well? It’s a choice that calls the individual college student’s responsibility into question and each parent has to make this choice before sending their young adults away.
The new regulations definitely throw a monkey wrench into some of the plans that credit card companies have. I know when I was in college, I couldn’t walk through the student center without being bombarded by several credit card companies trying to get me to sign up for an account in exchange for a free t-shirt. As a result, 84 percent of undergraduates in 2008 had at least one credit card, which is an 8 percent increase from 2004. About 50 percent of the students surveyed had at least 4 credit cards with an average debt of $4,100 by the time the graduated. But if the students have to be at least 21 years of age or have a provable income, it won’t be as easy to get them to sign up these days and the companies may have to search for other recruiting techniques aimed at a slightly older demographic.
The decision is a tough one for parents. They know the importance of building a decent credit history and it’s best to start young. However, many college students think that credit cards are free money and they tend to use their credit cards for unnecessary expenses even when they have no means of paying the balance each month.
Many parents are choosing to give their college students a credit card that is linked to the parent’s account. That way, they can monitor their spending closely and help the student learn responsible use of a credit card. Since the students know their parents are monitoring every purchase, they are less likely to use it for unnecessary expenses. It also helps build up the student’s credit for the future.
Do you have kids that will be leaving for college any time soon? Or do you already have kids in college? What are you doing or what do you plan to do in order to teach them to use their credit responsibly?