Parents everywhere are helping their sons or daughters get ready for their freshman year of college. There’s always a lot of emphasis on roommates, orientation schedules, dorm room furnishings, food plans and so forth. However, is anyone talking about getting a credit card? Is credit a college necessity? College kids, especially college freshman, are a primary marketing target for credit card companies. Because most college freshman spend a lot of money, but frequently don’t have enough money, many parents and most credit card companies have decided that a credit card is a must for every college freshman. Financial professionals and researchers, who are familiar with the credit behaviors of college kids, will tell you that a credit card is a must for a college freshman if they know how to use it in a responsible way. They urge parents to have a credit talk with their college freshman before they go off to school and start using the card. Discuss how credit works Here’s a list of credit tips or points for all parents to use in a discussion about credit with their college freshman. o A credit arrangement of any kind – including a credit card – is a loan. Too often people think credit is an income alternative. A credit card is a loan, or new debt. It is not income; it needs to be repaid. Anyone who has a credit card, in their name or co-signed with someone else, needs to understand the implications of annual fees, annual percentage rates, and grace periods, as well as transaction fees and other charges that may apply depending on the situation. o A credit card bill should always be paid by the due date. Paying bills on time is the best way to attain and maintain a positive credit score. Paying on time also eliminates costly late fees, which can be very high on a credit card. If possible, pay the credit card bill in full. Paying the balance eliminates finance charges. If the bill can’t be paid in full, try to pay more than the minimum payment. Making only the minimum payment prevents making any progress on the balance, and increases the balance with tacked on finance charges. o Help your child get in the habit of saving receipts. This is a basic principle of money management record-keeping and will be an important habit throughout their lifetime. A receipt may also be a “lifesaver” in the event of billing discrepancy. o Tell your child to never lend their credit card to anyone. Anyone who lends a credit card is setting themselves up for possible fraud. o Each year, help your child review their credit report. Make sure that it accurately reflects their financial situation, and does not include any fraudulent activity. o Last but not least, if your child becomes overwhelmed by credit card debt, seek help immediately. Facing a financial problem is the first step to solving the problem. Shirley Anderson-Porisch is a Regional Family Resource Management Educator with the U of M Extension Service.
