Should Teens and College Students Have Credit Cards?

young woman in black tank top looking at phone with credit card
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Credit card debt is a major problem, and every year millions of people find themselves in over their heads with debt. Interest rates rise, payments get missed, and credit scores can get badly bruised.

Buying a home, renting an apartment, obtaining insurance, applying for a job, and even some cable and telephone providers will review your credit history. Because of the long-term impact of credit, it's important to educate the teenagers in your life on how credit cards work and what they mean for their future. In this article, learn how debt impacts young adults, how credit cards can actually be beneficial for teens, and more.

Young People and Debt

According to a 2019 survey by EVERFI and AIG Retirement Services, about one in every three recent high school graduates has at least one credit card. And among those students with credit cards, nearly a quarter (24%) already have more than $1,000 in credit card debt.

When someone turns 18 and can qualify independently for a credit card or loan, they become a prime target for lenders. Credit card companies tend to target young adults when they arrive on college campuses, with banks and credit card vendors often giving away gifts for signing up, and otherwise making it very easy to do.

In 2019, credit card law was updated to require credit card companies to verify a student's income before giving a credit card them a credit card. Students without income now must get a cosigner to qualify.

In order to decrease the amount of debt young people take on, it's important to start talking about credit with teenagers from an early age. You can discuss things like the effect of high-interest rates, minimum payments, and the devastating effect that late payments can cause. If teens are not properly prepared from the beginning, it can become difficult to keep up with credit card payments if they get out of control.

Why Most Students Should Use 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.

Credit cards offer convenience, but their main purpose should be, as mentioned, to establish a good credit history. That way, when the time comes, your teen will be more likely to:

  • Qualify for car loans and mortgages
  • Be able to rent an apartment
  • Qualify for favorable interest rates on all types of loans
  • Obtain lower auto and homeowners insurance premiums
  • Qualify for a job (employers are increasingly using credit scores when evaluating job candidates)

The best way to learn is often by doing. And for some teens, having a credit card in high school might be beneficial. If you're thinking about opening a credit card with your teen before they go off to college or start in the workforce, think about the following:

  • Is the teen responsible?
  • The teen is given a credit card with a low credit limit
  • Parents monitor the teen's spending and payments monthly
  • Parents discuss the choices made, the implications of those choices, the obvious and hidden costs with the teen
  • Parents make suggestions for positive changes

Credit cards can also be a great tool for emergencies. Most teens and 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, and a credit card can act a good safety net.

It’s Still Up to the Parents

If you want your child to have good spending habits and resist the temptations involved with having a credit card, it’s up to you to educate them. They need to know all of the pros and cons, or in other words, the benefits of having a card and the devastating consequences of misuse.

As a parent, you need to sit down with your child before they head 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.

Student credit cards are designed for college students who are looking for a first credit card. These cards often have similar annual percentage rates (APR) to regular credit cards, but are appropriate for young people who don't have much credit history. Speak with your child about opening a student credit card as an alternative to a traditional credit card.

The Bottom Line

The best way to properly prepare your child for using a credit card is to take the time to educate your child at a young age so they can establish credit in a responsible manner.

Remember to 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. This way, they will be able to hit the ground running with a solid credit history and have established ​sound financial habits going forward.​

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