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Students Credit Cards Can Lead to Too Much Debt

by Francine Huff

Soon, college students younger than 21 won't be able to get a credit card without an adult to co-sign the agreement, or unless they can prove they have enough income to make the payments. Credit card reform laws are going to require permission from the co-signer to increase a student's credit card limit, as well.

If you have a kid in college (or even high school), you may be wondering if you should co-sign for a credit card. There are a host of reasons why that may not be such a great idea. These include:

  1. Your kid does not have any income to report on a credit card application. This may not seem like a big deal now if you still have a job. But what if you lose your job? Neither you nor your son or daughter is going to be able to pay the credit card bills.
  2. Your kid has never learned to handle money responsibly. A thorough financial education should be mandatory for all kids, but it is not provided in most school districts. Before you sign your kid up for a credit card, take the time to discuss money basics like how credit and debt work, budgeting, and balancing a checkbook. Those lessons can go a long way in preparing your child to handle debt responsibly later in life.
  3. Kids can benefit from learning to save for what they want. Many people have grown up with a "gimme" mentality and expect to get everything they want now. In other words, they've become spoiled by expecting instant gratification. Help your young student become a more careful spender who gives thought to how money should be used before blowing it on stuff he or she really does not need. Paying with cash instead of credit cards is one way to help a student think twice before a purchase.
  4. You already have too much credit card debt. Although you may have good intentions in helping your child apply for a card, you're only hurting yourself if you're already struggling to pay down existing credit card debt. Avoid adding to the problem by exercising a little tough love, and skip co-signing.

Students with credit cards often make unwise spending choices that lead to them to graduate with mounds of debt. However, if you're really determined to co-sign, take the time to compare student credit cards to find the best deal, and be sure to restrict the spending limit.

Published 02/07/10 (Modified 02/07/11)


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