Student Credit Cards Can Introduce Your Child to Financial Reality
Student credit cards are valuable teaching tools for parents of college age students, as good credit will be essential to their post graduation lives. A spotless credit record impresses potential employers, insurance carriers and landlords with the students maturity and opens a lot more doors for the student than a sketchy credit record ever will.
Student credit cards, used properly, instill and reinforce the value of financial responsibility in college age children. One of the conditions for having a student credit card should be a part time job to cover all non school related expenditures. Students learn the value inherent in keeping to their credit limits and in making payment in full if interest and late fees begin eating away at their available credit. They also learn responsibility for paying their own way when they themselves have to cover the cost of their own fun.
Student credit cards teach the value of financial planning and budgeting. A credit limit does exactly that by limiting expenses and forcing students to plan ahead for their purchases so that they do not exceed their credit threshold. Card issuers typically impose low credit limits on student credit cards until the student has built up a good payment history. Interest will most likely also be higher until the student proves that he or she is not a significant credit risk. Prepaid student credit cards can be a big help with this. A prepaid card must be loaded with the students own funds rather than using lender funds for purchases financed by credit and prevents the student from incurring more debt than he or she can handle. The card issuer reports the prepayments to the major credit reporting agencies, thus helping to build the students credit history just as though he or she were using a standard issue credit card.