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It's August and many
families are busy
packing their recent
high school
graduates off to
college. Have you
checked everything
off your list...
clothes, sheets,
towels, and... a
credit card? More
importantly, is your
college freshman
ready to handle the
responsibilities
that come with a
credit card?
Many parents
actually prefer
their student have a
credit card to pay
for essentials such
as books, school
supplies and
gasoline and have
already allowed
their teenagers to
be a "user" on their
credit card or have
allowed their teen
to have his or her
own credit card with
a low limit in order
to acquaint them
with the ins and
outs of money
management. Parents
also feel more
secure knowing their
student will have
the ability to take
care of an emergency
situation with a
credit card.
It's a good idea
that parents and
teens sit down to
predetermine the
amount that he or
she is allowed to
charge each month
and be sure your
student understands
the importance of
keeping some of
their credit limit
in reserve for an
unexpected
emergency. By adding
a teen to the
parent's credit
card, parents can
monitor usage and
prevent surprises
since your teen
cannot run up months
of debt without your
knowledge.
Although your
student will be very
tempted to get his
or her own credit
card, try to
encourage your
student to use your
credit card for at
least the first year
of college until
they prove they can
handle financial
responsibility. When
they do finally
apply for their own
credit card,
encourage them to
shop around for low
fees and low rates.
Caution them to not
be taken in by
"teaser rates"-low
rates that jump
after a few months.
The novice card user
needs to understand
the consequences of
paying the
balance-interest
accrues until it is
paid off-and the
consequences of
paying late includes
a hefty fee and
potentially a bad
credit report.
Encourage your
student not to apply
for a credit card
just to get the free
tee-shirt being
offered.
Students should
understand that from
the time they make
their first purchase
with their own
credit card, credit
bureaus will
maintain their
credit history in
the form of a credit
report. This history
will be reviewed by
future employers,
insurance companies,
apartment managers
and consumer
businesses, such as
auto dealers.
Maintaining a
positive credit
history is an
important
responsibility.
Most students, both
high school and
college, want to
prove they are
capable of managing
their own lives,
independent of their
parents. This is
just a part of
growing up. But to
accomplish this
goal, they must
prove they can be
responsible money
managers.
Most parents reading
this column would
never have dreamed
of having their own
credit card in
college. But today's
students have more
purchasing power
than ever and credit
card companies are
vying for their
attention. If you've
taught your child
good money
management, you can
drop them and their
credit card off at
the dorm with peace
of mind. Now, if you
could only teach
them how to do their
own laundry...
Provided as a public
service by First
Commercial Bank and
the
Independent Bankers
Association of Texas
(IBAT).
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