Helping Your College Student Build Good Credit HabitsFebruary 27, 2019

dollar sign and credit cards for fee-paying education on gray student desk background

There are so many things college students need to learn and one of the most important topics, actually used every day, is financial management. A big part of our adult lives revolves around finances and with that comes learning to handle credit responsibly. So much of our life is affected by credit. While some parents may try to protect their children from credit card usage, it may be a good idea to not avoid the unavoidable and start the conversation earlier rather than later. With proper guidance, planning and budgeting – credit responsibility can be one of the most beneficial things you teach your children. So… let’s start the conversation.

What are some of the top credit mistakes young adults make?
Research has shown, that young adults often do not value credit or think it is important. Often times, they do not understand how recklessly using their credit card can interfere with things in the future (because of a bad credit report). Employers are increasingly running credit checks on job applicants and using that information to make a decision. Also, upon graduation and apartment hunting, know that many landlords check applicants’ credit – your credit history could make a big difference in your next apartment search. With this comes the notion that many young adults do not fully realize the effects of a missed payment. Missing a payment, and other errors, can stay on your record for up to 7 years. Young adults need to take the payment deadlines serious. As they reach almost 30 and are ready for a new car, a new apartment/house, a wedding or family – they may still be dealing with the consequences of these bad financial decisions. Futhermore, another factor that should be drilled in is understanding the power of compound interest. Buying items on sale, charging those frappuccinos getting a travel deal all sound great, but if a card holder only makes the very enticing minimum monthly payments, they can end up spending hundreds or thousands in interest fees. Not so much of a sale now, huh?

What are some ways young adults can build good credit?
They can start by becoming an authorized user on a parent’s account or open up their very own credit card. They can then use the credit card monthly for occasional, small purchases (gas, grocery bill, phone bill) which will help build their confidence in their ability to make the monthly payments and handle their finances responsibly. Payment due dates should be marked on a calendar, or set to auto pay, so that no payments are ever missed. Balances should always be paid in full. They should also avoid applying for many credit cards or co-signing for friends.

So, do you think your child is ready to handle the responsibility of a credit card?
Some college students will be more mature than others, and ready to handle the responsibility of credit better than others. If your child has ever paid a bill on their own, this is a good sign. If they have a checking or savings account, also a good sign. Managing a checking account and debit card, as well as having the maturity to save money, are all good signs. If they have, or have had a job, chances are they understand the value of a dollar a little more than someone who does not. Also, a good sign.

Credit cards, credit scores and credit history are so important to learn about. While we can’t guarantee you’ll always use what you learn in Calculus, or some other college subjects, we can guarantee that financial education is one of the best gifts you can give yourself and your child.

To get your student started with a checking or savings account, view Spencer’s StudentEdge Free Checking and StudentEdge Savings accounts. There are some great features designed specifically with students in mind. If you feel your student is ready for a credit card, view our Visa College Real Rewards Card. Visit the “Personal” section of our website for more information on these products.

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