Should You Co-sign for a Credit Card with Your Teen?
Changes in credit card legislation have made it tougher for teens to get credit cards. Unless your kid has enough income to pay monthly credit card bills, he cannot get a credit card without you or some other adult serving as a co-signer.
You may be thinking you’ll just pay the bill for junior until he gets out of school, but while that seems like the obvious solution, you may want to reconsider such a plan before it’s too late.
Yours, Mine, Ours
The fact is that anytime you co-sign for a credit card, you are just as responsible for paying it back as the other person. So if you help your teen or any other person get a credit card, you could find yourself footing the bill even if you never planned to do so. Many relationships have been damaged over co-signed credit cards gone wrong, so think long and hard about getting involved with any credit card offers your relative or friend thinks are too good to pass up.
Credit Card Debt
You can’t assume that the person you co-sign for is going to show good judgment about using a credit card. Many people have gotten into serious financial trouble by maxing out credit cards and not having enough income to pay off the balances. Even if your teen promises not to charge up to the limit it could still happen.
According to the Associated Press, 84% of undergraduates had at least one credit card in the 2008 spring semester and half of college students had four or more credit cards. Seniors had average credit card debt of $4,100 when they graduated.
Don’t fall for the old “but I need to establish a credit history” argument. College students aren’t expected to have an extensive credit history. Once they graduate and get a job they can begin building a credit history. Young people who finish college without mounds of credit card debt can start off their adult life without the stress of a low credit score or poor credit report.
Secured Credit Cards
Giving your teen a credit card before he is mature enough can end badly. But if you really want to help your kid begin establishing a credit history and truly believe having a credit card is necessary, consider secured credit cards. This type of credit card requires that you make a deposit of about $250 to $500 into an account in order to receive a credit limit for the same amount. The low credit limit ensures that the cardholder won’t get too deep into credit card debt.
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