Is a Credit Card Right for Your College-Aged Child?

As giving credit card to your college-aged child can have both positive and negative effects, it is important to tread with caution

As your child grows up and reaches college, it becomes important for parents to provide the necessary financial support. While cash and cheques were preferred in earlier times, credit cards appear to be a simpler and more manageable  option for parents. To help you decide if you want to give a credit card to your college-aged child, here are some important things to understand.

Financial responsibility – With a credit card, your college-aged child can start learning about financial responsibility at an early age. This will benefit them throughout their lives if they manage the credit card expenses in an economical manner. Based on their credit card usage habits, you can also help your college-aged child understand the difference between needs and impulsive spending. This will help your child to develop the right habits and also foster financial literacy.

Building credit history – If your college-aged uses the credit card in a responsible manner and pays the bills on time, it can help them build a good credit history. It will be useful for them in later life when they seek a loan for higher education. A good credit history will also be beneficial when buying a car, renting an apartment, etc.

Dealing with emergency situations – If your college-aged child lives far away, it will become difficult to transfer funds on an immediate basis in case of an emergency situation. Cash will not be an option and you may not have enough funds in your savings account. During such emergency situations, a credit card can be a life savior. Even if you have put a limit on the credit card, you can increase it at times of need.

Protection from substance abuse – If you give cash, you may not be able to track where all the funds are being utilized. In today’s times, it is common for students to get exposed to things like drug addiction. With a credit card, you can track where all the transactions are happening. If you notice some red flags in the credit card bills, you can provide the necessary guidance to your child. Doing this will not be possible if you give cash to your college-aged child.

Disadvantages of giving credit card to your college-aged child

While there are many benefits as discussed above, parents also need to be aware about potential drawbacks of giving a credit card to their college-aged child. One of the common problems noticed is the tendency to overspend. College years are impressionable and your child may be tempted to impress their friends and peers. Impulsive behavior is another risk, which can lead to unnecessary spending on social events, dining and travel. Also, setting the limits on the credit card can create relationship issues with your child.

To avoid such issues, make sure you teach financial literacy to your college-aged child before giving them a credit card. You also need to track expenses to ensure that your child is following the right financial habits. With these steps, you can confidently provide a credit card to your college-aged child.