Credit Cards and College Students
Advice for Parents to Give Your College Student a Good Financial Start
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Credit cards can be a great way for college students to a build a credit history while they are in school. Credit history is required to qualify for many major financial transactions these days, from renting an apartment to applying for student loans. Responsible use of a credit card can help college students to build good credit for these future purchases. Credit cards should be used with care, as they are not a replacement for money you don’t have. Parents can help protect their college student from amassing debt on a credit card. By imparting responsible financial advice, you can better ensure that your student will spend wisely with his or her credit card.
Student Credit Cards
Student credit cards are specifically designed for college students with limited credit history. They often have no annual fee, cardholder benefits and perks such as a rewards program. For example, you might earn rewards on college essentials like textbooks, online shopping and dorm room supplies. The Discover it® Student card is perfect for students wanting Cashback on purchases, or the Discover it® Chrome Student card offers rewards on gas and restaurant purchases for the frequent road traveler.
Low Credit Lines
College students should understand the concept of a credit limit and how much available credit they have at a given time, as well as not going over the credit limit. Student credit cards often start off with a lower credit limit than traditional credit cards, since college students are getting used to credit.
Low Interest Rates
College students should look for a card with lower interest or APR (annual percentage rates) if they expect to carry a balance. However, parents should advise students to attempt to make small enough purchases with their credit cards so that he or she can pay off the balance in full each month. This helps college students avoid accruing debt through interest build-up.
The demands of a college student include heavy class loads, studying, extracurricular activities and part-time jobs. Some may not have adjusted to living on their own yet and could need extra reminders of responsibilities. A busy college student might forget to pay their credit card on time, without realizing the implication on their credit score. To avoid making late payments, urge your student to sign up for email or text reminders or to enroll in automatic payments.
Paying for Tuition
Some students with scholarship funding or financial aid checks may choose to use a rewards card to pay for college tuition. But some universities do not accept credit cards as a form of tuition payment, or they may pass the processing fee on to the student. It is important to check with your university to make sure they accept credit cards and to understand the fees that may accompany using a credit card to pay for tuition. You could wind up spending more in fees than you receive in rewards points. But credit cards should not be used to finance tuition because student loans may offer lower interest rates and more flexible repayment options.
If your student is heading off to an out-of-state college or university, you may want them to look into cards that offer airline miles and travel rewards. By accumulating miles on purchases, your son or daughter could make it home for a visit sooner than you think.
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The largest measure you can take to guarantee that your college student is managing his or her credit card responsibly to keep the lines of communication open. Remind your student to come to you first if they start accumulating debt before it damages their credit standing. By teaching them the importance of financial responsibility from a young age, they will be more empowered to handle money responsibly in the future.