Credit cards and the college student

Young man shopping online with a credit card

Many parents wonder if it’s wise for their teen to have a credit card while in college. Your teen’s first card sets the foundation for establishing a long and healthy credit history. This is an important first step in teaching your teen how to manage finances. The question is, what kind of story will this early credit history tell?

If your child is at least 18 years old and wants to have a credit card in college, here are some tips on how to use the card responsibly to build a positive credit history.

Make responsible spending decisions

  • Don’t use the credit card for impulse purchases. This is one way credit balances pile up.
  • Remind your teen to only charge what can affordly be repaid in full when the monthly statement arrives. Even if this goal is not met, at least be aware of the need to control credit spending.
  • Think of the credit card as an emergency source of funds for essential expenses. Sure, your teen may use the card frivolously at some point, but it's best for your child to leave at home when your teen anticipate situations that could lead to poor spending decisions.

Keep a low balance

  • If your teen carries a card balance, advise your student to keep it below 25% of the available credit line. Credit rating agencies like cardholders to maintain a low credit balance that can be paid off easily. A higher card balance could reduce their credit score.
  • Pay the credit card bill on time, every month. Do this even if your teen only make the minimum monthly payment. No piece of the credit report is more important than payment history.
  • Avoid using the credit card for expensive cash advances or personal loans. These options often come with higher interest rates and additional fees, making it more difficult to pay off the balance.
  • Limit applications for additional credit cards. One is enough. Plus, applying for multiple cards results in more inquiries to their credit report. Each new inquiry could also work to lower their overall credit rating.

Teach your college-aged teen to use a credit card responsibly. It's a smart way to start building a positive credit history.

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