Just as the freshman of 2017 can pile up student loan debt without even understanding the significance of student loan debt, they can also fall prey to credit card debt. New college students who are not used to managing their personal finances might rack up high interest debt on their credit cards if they don’t use their cards responsibly. A mountain of credit card debt will not only keep them from building their credit score but will also bar them from getting new lines of credit at a favorable rate. Not only will the lenders question their financial creditworthiness but their employers might also give them a pass if they don’t have a good financial record.
Parents might think that co-signing on a credit card of a college student would solve the issue but there are other financial mischiefs that they can fall into. Here are few ways you should make sure your child doesn’t get into any of the bigger issues.
Make sure your child knows how the credit card works: People usually take credit cards for granted as this is what they learn from mostly their parents. You should make sure your college-going kid knows how the credit card works. The interest rate on your credit card is something that he should know about as this is the most important thing which can push you towards debt.
Begin slow: Experts suggest that you should slowly introduce your child to the entire world of credit cards. You may initially begin with a prepaid card which is loaded with few dollars. Once your college student kid starts understanding the meaning of dealing with cards, you can gift him a credit card. However, make sure he is perfectly ready to use a credit card before handing it over to him.
Teach him to be a smart user: This clearly means paying the bill at the right time and also the full amount so that you could smartly avoid interest charges, late fees and also choose a card with the lowest rate. You should teach him how to manage his finances so that he has enough money in his checking account to meet his bills and other expenses.
Teach him the vitality of credit: It is your duty to teach him the vitality of having good credit score. He should be well informed about the fact that it is only through a good credit score that he can get new loans at a favorable rate, buy an apartment with ease, get a car and a house and also grab the best job in the market. Employers are all running fast credit checks to make sure the job applicants are also financially responsible.
Even after teaching him the ways of a credit card, if he still incurs debt, you should tell him about the present debt consolidation loan rates so that he could take out one in order to consolidate his debts into a single monthly payment.