Teaching Responsible Credit Card Use

It's an unfortunate fact that most students never get formal lessons in managing their credit and debt. For many young people, their first brush with being responsible credit card users won't come till they are in college - away from home and the guidance of mom and dad. The moment they step on campus, new college students will be wooed by major credit card companies, all of them eager to establish themselves as 'the first card in your wallet'.

If your child will be going off to college in the fall, one of the best things you can do for him or her is to get them started on the right foot to handling credit responsibly. Needless to say, example is the best way to teach. The more responsibly you handle your own credit card use, the more likely it is that they'll absorb your attitudes toward the use of credit cards.

Beyond that, though, one of the easiest ways to teach responsible credit card use is to cosign an application for one of the credit cards that is especially designed for student use - and do it before they're off on their own. Each major credit card line features at least one credit card that has low credit limits ($500 to $1000), no annual fee and a moderate APR.

Make a big deal about applying for the credit card. Explain to them that each credit card application they fill out will be noted on their credit report - high school students especially understand the concept of a 'permanent record' - and that the more credit cards they apply for, the worse their 'permanent record' will become. That way, when they hit campus, they'll be forewarned against the myriad credit card companies telling them 'it's no big deal'.

Show them how to compare credit cards and figure out what credit will actually cost them. If you're not sure of it yourself, see our articles about Annual Percentage Rate and how to figure out the cost of a credit card. Make sure that they understand what a 'late payment' is, and how it will affect the charges on their credit card. When they understand that making a payment late will add $29 to their bill this month, AND increase their APR so that every bill from now on will be higher, they're far more likely to appreciate the significance of making payments on time.

Finally, before turning them loose with a credit card, take the time to sit down with them and work out a loose budget they can follow. Then make a monthly date to sit down and go over the credit card bill and credit card receipts together. You'll be able to monitor spending and help them work out ways to stay within budget while still paying off their credit card properly.

It's a common aphorism that it takes only 7 days to establish a new habit. Take a few months before your student heads off to college to help them establish good, responsible credit card habits. It's a lesson that will last them the rest of their lives.