Many parents debate on whether or not to send their new high school graduate off to college with a credit card. For some parents, the thought of their kid with unlimited access to anything they want to buy can be far from comforting.
A credit card can open up a slew of issues, such as debt and low credit scores, causing a potential financial disaster if they’re not careful. On the other hand, there are a handful of benefits to having a credit card, some of which are necessary to begin new life-events down the road.
Advantages for the future. Credit reports are pulled when buying a car, buying a home and even during the employment process. Any of those actions will require a credit score, so it’s important to encourage them to start building credit earlier rather than later.
A teaching tool. Being responsible for one’s actions is a fundamental lesson we teach our children. Being responsible for one’s financial decisions is just as important. Opening a line of credit not only builds a credit score, but can be used as a way to learn about accountability. Monitoring monthly spending habits and learning to pay them off well before they’re due will help them understand they are liable for what they spend.
Responsibility pays off with rewards. Many credit card companies will offer a reward program when a line of credit is opened. Advantages such as airline miles are granted to those who pay off their balances in full each month. Not only is this an added perk to a not-so-fun adult chore, it encourages good spending habits.
By leveraging these credit tips, college students can begin to build a clean financial record and will learn how to juggle their financial decisions responsibly.