Should Teens and College Students Have Credit Cards?

Twenty-something woman with headphones on, holding credit card while shopping online

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Credit card debt is a major problem, and every year millions of people find themselves in over their heads. Interest rates rise, payments get missed, and credit scores are trashed. While credit card debt can be financially devastating, credit plays an important role in our lives.

Buying a home, renting an apartment, obtaining insurance, applying for a job, and even some cable and telephone providers will review your credit history.

Young People and Debt

Once someone turns 18 and can qualify independently for a credit card or loan, they become a prime target for lenders. Credit card companies know that young adults are eager to begin their adult lives, which often happens when they go off to college. Many college campuses are filled with banks and credit card vendors giving away gifts for signing up, and otherwise making it very easy to do.

The real problem is that this will be the first credit card they encounter for many of these students. They pay little attention to interest rates, terms, and card features. The card they choose may set them up for failure right from the start.

Also, many young people are not adequately educated about credit cards and debt. They may know that you have to pay the money back, but they may not be prepared to understand the effect of high-interest rates, minimum payments, and the devastating effect that late payments can cause. When most young people have relatively low-paying or part-time jobs, it can become difficult to keep up with credit card payments if they get out of control.

Why Most Students Need Credit

Despite all of the negative consequences of credit card debt, the fact is that most students need a credit card. If, for any reason at all, it’s to establish a credit history. You need credit to build a credit score, so obtaining a credit card at a young age is an easy way to do this. Also, one of the important factors of your FICO score is the length of credit history. The sooner you establish a line of credit, the longer your credit history will be when it comes time to take out a serious loan, such as buying a house.

Not only that, but credit cards are great for an emergency. Most students won’t have a significant emergency fund of cash sitting at the bank, so having the ability to come up with money in an emergency is important. As a parent, you probably don’t want to think about your son or daughter being stranded if their car breaks down, or coming up with money if they need to fly home for an emergency so that a credit card can provide a good safety net.

It’s Still Up to the Parents

If you want your child to have good spending habits and resist the temptation to have a credit card, it’s up to you to educate them. They need to know the benefits of having a card and the devastating consequences of misuse.

As a parent, you need to sit down with your son or daughter before heading off on their own. Discuss the reasons why it’s important to have a credit card and credit history. Also, you should help them find a good credit card, so they don’t end up signing up for the first one they come across. Once they obtain a card, make a purchase and walk them through making the monthly payment. Either by check or electronically so they know what to expect and are familiar with the process.

Finally, go over the ground rules. Explain what the credit card should be used for exactly, and who is responsible for the payments. You want your child to use this tool responsibly, so it should be clear that they need to keep up with the payments.

Take the time to educate your child at a young age so they can establish credit in a responsible manner. They will be able to hit the ground running with a solid credit history and have established ​sound financial habits going forward.​