Creating a Credit Card Responsible Adult

By Nick Cumberland

With high school graduations complete and a new crop of independent students preparing their first foray into the college experience, parents are faced with many decisions facing finances and the responsibility they turn over to their children. Teaching fiscal responsibility can become a daunting task, but is as crucial to children as healthy diets and hitting the books.
So do you think your college freshman should apply for a credit card? Some of the benefits include, establishing a credit history, assuring security in an emergency, and teaching your kids about independence. The negatives can continue to affect a young person long after the spending has occurred.

Your mailbox will begin to bulge with credit applications after your child is accepted at the university of their choice. Credit card companies offer such attractive low rates that two-thirds of today’s college students have at least one credit card. Make sure your kids are aware of the risks that come along with plastic. Talk with them about the following information:
• When you use a credit card, you're borrowing money from the credit card company to make a purchase. You'll then receive monthly statements that list the charges and request payment of this "loan."
• A credit card isn't free money.
• You should only charge what you can afford to pay back.
• Credit cards shouldn't be a money substitute for items you can't afford.
• Charges should be paid back on time, because when bills aren’t paid in full, the outstanding balance collects interest charges.
• It's important to pay bills in full, but when that's not possible, an amount more than the minimum payment should be paid.
• If you pay just the minimum due you are not reducing the amount owed, since interest charges are accruing.
• Always notify creditors when you move so that account statements can be delivered promptly, avoiding additional fees and interest payments.

Establishing Credit
Help your kids understand that their credit record, just like their school transcript, can have a lasting impact on their lives. While the grades in a transcript reflect academic performance, the credit payments, debt, and income recorded in a credit history show the level of financial responsibility.
As a financial resume, your children’s credit history will be taken into consideration when they want to get a loan, buy a car, rent an apartment, get a job, or buy a house. A strong credit history is vital to a good financial future.
With student loans and credit cards, college students can start a good credit history by establishing their ability to manage and repay debt. To help maintain a good credit history, remind them to:
• Live within a budget,
• Pay all bills on time.
• Keep accurate records of all finances.
• Carefully track how much is being charged to avoid overspending.

Five Signs of Overspending
Teach your kids to identify these signs of overspending:
• Always paying bills late.
• Only making the minimum payment on a credit card.
• Exceeding the credit limit.
• Working overtime to keep up with credit card bills.
• Using one credit card to pay off another.

So parents take a deep breath and sit down with your children to discuss all the risks they will face while enjoying the first year of college. Credit Cards can be very helpful tools while helping your children enjoy their college experience, but they can also turn into a nightmare.