Why Our College Student Won’t Be Getting a Credit Card

There’s been so much in the news about the student loan debt crisis, that many people have overlooked the other type of debt that college students often incur, namely, credit card debt.

In a recent study, it was found that undergraduates are carrying an average of $3,000 in credit card debt, and that graduate students have credit card debt of $4,000-$7,000.

I was so shocked by these statistics that I decided to explore this issue thoroughly before sending my son off to school in August.

As the parent of a rising college student, I have been so focused on the avoidance of student loans and how to get him prepped for life on his own, that I didn’t give as much thought to warning him about the use of credit cards.

Besides, he doesn’t have a credit card and we don’t have him listed as an authorized user on any of ours, so it shouldn’t really matter, right? Well, I have to admit that I was wrong.

The Credit Card Act of 2009 – Does it really protect students?

The Credit Card Act of 2009 put in place restrictions that were meant to protect college age kids from being taken advantage of by credit card issuers. This included bans on campus credit card marketing and the issuance of cards for anyone under 21, unless they have a co-signer or can provide proof of the ability to make payments. What the writers of the act failed to take into account, is the ability of credit card companies to market to their target audience through the use of social media sites.

In fact, it’s estimated that 95% of undergraduate and graduate students have Facebook accounts. Considering the access companies have to information provided through social sites, it’s very likely that young adults will be exposed to credit card ads targeted to them. I’m not naïve enough to think that my kid wouldn’t click on one of these ads, if he thought he could get something for free.

The pros of getting my son a credit card

  • He can establish a credit history before he graduates, which means that he has a better chance of qualifying for a decent interest rate on a car loan when he leaves college, and he most likely won’t need us to co-sign on a car loan!
  • A positive credit line means that he will probably be able to qualify for an apartment lease on his own.
  • More companies are pulling the credit reports of potential employees, so he could have an edge when applying for a job.
  • He has access to money in case of an emergency.

The cons of getting him a credit card

  • He goes hog – wild and uses the card to pay for video games, pizza, and I don’t even want to know what else, thus spending up to his credit limit.
  • He only makes the minimum payment and accrues an obscene amount of interest charges.
  • He forgets to make a payment or payments and negates the intent of building a positive credit history.
  • He loses the card and opens himself up to fraudulent charges or identity theft.

What’s the solution?

In the end, we decided to get him a low interest rate secured credit card, one that reports to all three credit bureaus, in his name. However, we hold possession of the credit card and he doesn’t actually get to have it until he turns 21 or graduates, whichever comes first. As long as he maintains a positive balance in his checking account and manages his money responsibly, we will make a small monthly payment on his credit card in order to build up the initial deposit.

This will accomplish two things: build up his credit line and insure that he has a solid credit history. As a bonus, he will have a nice chunk of money available upon graduation.

What do you think about college students and credit cards?

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