Major credit card companies are very active on college campuses these days, but are they helping you or jeopardizing your financial future? Having spent several years in the collection industry, it has become apparent to me that college students are the fastest growing group of Americans to become debt ridden. Credit card companies make it very easy to get a credit card by showing up on campus and offering a free gift in return for the simple act of filling out a credit card application. What better candidate for a credit card than a person with no debt and a future college graduate income.
There are a great number of high school students that also have credit cards. By law, anyone under 18 must have a co-signer, but you would be amazed at the amount of parents that did not know their minor child had a credit card. These parents are usually willing to pay off there child's balance just to keep them from starting life with a poor credit rating.
The biggest problem for young people with credit cards is lack of knowledge when it comes to how credit works. They are often not aware that if they only make the minimum payment they will be making payments for a long time and will be paying a great deal of interest. They also need to understand that their payment must be received by the due date or they will be charged a late fee. Today some of these fees can be in excess of $50, causing their balance to get out of control very quickly. Many of todays credit cards also have hidden fees. It is essential that a cardholder understand what is written in their card member agreement.
Parents should start children out with a checking account. Adding a debit card is the next step. Once they have that under control, a credit card with a reasonable limit is next. Make sure your child understands how interest works and how easy it is to get in over your head if you overspend. If you have a $1000 balance at 18% interest and you make a $36 a month payment, it will take you about 9 years to pay the balance in full. If a college student charges this during his freshman year, he will have that balance paid off 5 years after he graduates.
The best thing you can do for your child, when it comes to their financial future, is to educate them about money and to set a good example. They are most likely to do what they have seen done. |
