Having your children go off to college can be a stressful time for any parent, particularly with the knowledge that the average college student carries over $2,200 in high-interest credit card debt. So how can you teach your children responsible credit card use? Here’s some good advice to send your children off to school with the information that will prepare them.
The best way to teach your children responsible credit card use is to talk to them before they move away on their own. Before they go off to college, sit down with them and go over credit card offers together. Explain to them the terms and conditions, exactly how cash back credit cards work and even complete the credit card application together.
Start by looking online together, going to different banks to find the best kind of credit card. Student credit cards may be especially good. Explore rewards programs, cash back credit cards and limits and, when you have found a good potential credit card, get an application.
Next, read the fine print and help them understand what it means. Talk to your child about the consequences of late payments and going over the limit, as well as how much they’ll pay in interest each month and what happens if they don’t pay their balance in full. This is also a good time to speak to them about the importance of building a good credit score and how the choices they make now will affect them for years. After you’re sure your child understands the consequences of credit, fill out the credit card application with them before they go away to college.
Another important credit talk you should have before they go off to college involves credit card fraud and safety. Teach your child the dangers of using a credit card by going over safe places to use the card–especially online.
After the credit card arrives in the mail, help your son or daughter develop an efficient way to keep track of their paperwork. Teach them about storing receipts and keeping track of what they’re charging each month. Also show them how to go over their statement and check it against their records for accuracy.
After your child understands how to use their credit card, the consequences and responsible record-keeping, you’ll also need to help them learn accountability with their balance. Help them make sure they pay their balance every month and only use the credit card for reasonable expenses. At least at first, help them by checking in on their situation and discussing what’s going on and how they’re doing with credit use.
And lastly, here’s a note about helping your child through college by paying for tuition with a credit card. In general, paying for college with credit–whether it’s the student or the parent–is a bad idea. With responsible use, however, the right cash back credit card can be a great option for a parent helping their child go to school. According to a study from Sallie Mae, 19% of parents put part of their college costs onto a credit card, with an average amount of $5,822. Most of the people responding to the study said that they used credit cards to pay for college not for rewards but because of money troubles. This may scare many people away from what can be a great way to save some money while helping your child with college. If you have the money and the ability to pay your credit card bill each month, think about using a good rewards card to earn rebates on your college tuition.
When your student goes away to college they’ll be sent dozens of credit card offers weekly. Don’t take the chance that they’ll be sent off on their own with little understanding of how credit works. Sit down with them and discuss responsible credit use and help them develop a system that will make them self-sufficient and financially secure.