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Did You Forget to Send Your Kid to College With This Must-Have?

September 08, 2016 at 12:00 AM

Now that another college year has begun, I want to make sure that all the Moms and Dads have packed off the kids with one very important item:

A credit card.

Yep, you heard me right. And I do mean a credit card, not a debit card.

Listen up.

I love debit cards. Prepaid or linked to a bank account, debit cards are a great way for anyone to live within their means. Your adult children should definitely have a debit card.

But they should also have a credit card right now, for two related reasons:

  1. Having a strong credit score once they graduate will make their lives so much easier and affordable.
  2. Debit cards do nothing to help build a credit score. Credit cards do.

I wish it were different, but responsibly paying your bills and living within your means by using a debit card currently isn’t a factor in determining your credit score. And you better believe that today’s college students will be in better shape if they have a strong credit score once they graduate.

  • A strong credit score can make it easier to qualify for a better car loan deal.
  • A strong credit score can help land a rental; many landlords check credit scores.
  • A strong credit score can help open cell phone and utility accounts without having to make a deposit.
If your adult child doesn’t yet have a credit card, I would encourage you to reconsider. Of course, you need to step up to the plate and make sure they understand how to use the card responsibly.

Responsible Credit Card Usage = A few monthly charges that are paid off in full, on time, every month.

If you have a high FICO credit score of at least 720, one option is to add them to that card as an authorized user. Or you can co-sign on a new card. Search the web for “best student credit card deals.” But if your child gets a new card, make sure the credit limit is kept low. And because you are a co-signer (anyone under the age of 21 without income must have a co-signor) I want you to have online access to the account so you can check that the bills is always paid on time.

If you are concerned about a child getting in over his or her head, a third option is to co-sign for a secured credit card. A deposit is required with a secured card, and spending is limited to what is on deposit. Credit with training wheels! Just double check that any secured card your child signs up for, sends account data to one of the three credit bureaus. Most do, but it is worth checking.

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