College students are notorious for their credit card use. Some use cards to pay for tuition, entertainment, and room and board while others use the cards “just for emergencies.” We’re going to lay out the case for giving your college student a secured credit card before they head off to college.
Here’s why you should open a secured credit card for your college student:
1. Risk their money – A secured credit card is opened with an initial deposit amount that becomes the total credit line on the card. By opening a secured credit card, the college student knows he or she will have to pay the card with their own money – either with payments as scheduled, or with the loss of collateral in the event of default.
2. Limited risk – You can only spend as much as your credit lines. By having a secured credit card, you do not risk having more credit card debt than you have money. If you want to close your card because of a high balance, you can simply request that the collateral be used to pay off the card and the remaining balance returned to you.
3. Building credit – Having a good credit score is imperative to getting a good job, lowering your insurance premiums, and buying homes or cars. A secured credit card reports to the credit bureaus just like any other, helping your college student build valuable credit history that will come in handy after graduation.