Should I Send My Teen To College With a Credit Card?

My daughter is a college student and she has a credit card. She didn’t use it to buy plane tickets or expensive electronic gadgets, just gas, groceries, and a few drugstore items. But it all added up and when the school year ended, she had accrued quite a big balance. She got a full-time summer job and had to apply almost everything she earned toward this bill. Yes, she paid it off, but she had almost no money saved for the start of the next school year.

Was I happy with my daughter? No. I didn’t want her to get it in the first place, but she thought it would be nice to have for emergencies. Unfortunately, she and I didn’t define “emergency” the same way.

While her story had a fairly happy ending, many college students aren’t so lucky. Their debt is so large—the average is over $1,000—that they can’t pay it off and even worse, continue to use the credit card so the balance just keeps growing.

In recent years, college students have been graduating with both a degree and a mountain of debt. On top of credit card debt, according to studentloanhero.com the average student in the class of 2020 college graduates with $28,400 in student loan debt, which will balloon with interest during repayment. That’s an awful lot of debt to be saddled with before they even start their careers. Plus, many have a less-than-great credit history which can take years to correct.

Why do so many students have credit cards?

Go to any freshman campus orientation and you’re likely to see card issuers luring students to sign up for credit cards with offers of free hats and t-shirts and promises of high credit lines. This is the perfect time to get them as customers—they’re on their own and, for the first time, in charge of their own money and how they’re going to spend it.

But the rules have changed because of the Credit CARD Act, kids younger than 21 can’t get a credit card unless they have a parent cosign or can prove they can make the payments. It sounds like a good idea—who wants students getting deep into debt?—but there’s a slippery slope. “Prove they can make the payments” can be interpreted many different ways and some card issuers are defining it as “able to make the minimum payment of $25 or $50 each month.” Some students are even accepted based on the promise of future income from either a summer job or full-time employment once they graduate.

So should you send your child off to college with a credit card?

Let’s look at another statistic. According to student loan provider Sallie Mae, in 2019, 57% of college students had a credit card. The average debt on those cards among college seniors is $1,183. So with that in mind, plus the average total debt load, plan to have a serious discussion with your college student when he or she asks for a credit card.

There are several other options, with many of the same conveniences of a credit card, that students can safely use and build their credit:

Checking account with a debit card: Parents can easily deposit additional money when needed and students can’t run up a big bill.

Secured card: This works just like a credit card and allows holders to build a credit history. Before it can be used, you must make a cash deposit with the card issuer, say $500, which also becomes your credit limit. If you fail to pay the bill, the issuer can take your deposit. (Check out Hanscom’s secured card here.)

If you’re a student with a good part-time job (or have a parent who’s willing to cosign) and you really want or need a credit card, there are lots to choose from. Look for a card that has a rewards program, a low rate, and no annual fee. Be sure to read all the fine print. Follow up with them every month to make sure they pay it off completely and on time. If you've cosigned, your credit history is at stake too!

Choosing the right credit card can help you to get started building your credit, and to learn how a credit card can help to improve your credit score, download this free credit card guide. It includes a comparison chart to help you find the right credit card for your needs. Get your copy today!