Parents – Will Your College Student Run Up Credit Card Debt?
The question that we should ask ourselves as parents, will your college student run up credit card debt? Student credit cards are a great way for young people to establish a credit history. However, many parents trying to protect their kids from financial difficulties also forget to teach their kids the value of being responsible with their finances.
Many kids who have not been fully prepared for such a responsibility often find themselves still paying off a slice of pizza they bought when they were in college years later. It may sound crazy but problems with credit card debt can lead to this scenario.
Credit cards are an indisputable fact of life and there are many good reasons to have one. The secret college students need to know is to use the credit card as a tool to help them when they need it, but not in excess. Discuss with your kids what kind of expenses it is reasonable to charge and teach them how to analyze bank rates as well as credit card rates.
Credit card abuse has become such a problem that in February 2010, the federal government recognized the importance of protecting college students from the consequences of misusing credit cards. The law bans credit card companies from issuing cards to people under the age of 18. If you are under 21, you need to an adult cosigner to get a card, unless you can prove that you have the financial means to pay your bill.
Other provisions in the law limit some of the fees credit companies can charge and in response, credit companies are raising interest rates to avoid losing income. Although the law provides some protection, it is still up to the individual to manage credit wisely.
College students need to be made to understand that credit cards are actually high-interest loans in disguise and that companies may lend you money, but they get it all back and a lot more by charging you fees. Not paying of the entire amount each month can lead to big finance charges.
As parents, will your college student run up credit card debt? It all depends on how well you have prepared your college students for the real world.
For additional resources involving financial help, please view Savings Accounts Are Growing As People Adjust Savings Habits on this website.
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Mon, 13th Sep 2010 5:37 am
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