I wanted to run this situation by you, the professionals.
My daughter is prelaw and is going into her senior year of college. She does not work, she is focused on her GPA and LSAT scores. Because she has no income I have deflected the credit cards attempts to sign her up. She’s aware of this and is onboard. Am I taking the right approach in this? The only reason I have not talked with her about opening credit cards is because she has no real income. We have covered most other areas of personal finance, she has a $500 short term savings, invested a $5000 inheritance she received and she’s good with the small stipend that I gave her each month. Does keeping her away from credit cards for now make sense?
ETA: Man! Thank you guys so much for the advice the good and especially the tough advice. I’ll back off some, give her more responsibility over her finances and work on getting some credit established for her.
Sanity Check: College Kid and Credit Cards
byu/dinasway inpersonalfinance
Posted by dinasway
31 Comments
Keeping her away from credit cards makes sense if you (both) believe she will spend more money than she makes (whatever stipend you give her).
If she puts $500 in a credit card and pays $500 every month she’s fine. If she begins to spend more it’s a problem.
Sounds like the decision is normal, and it sounds like you both have a good head on your shoulders. Better to understand credit than hide from it.
No credit card needed. If she’s responsible and informed though, no need to hide from it.
Does she have credit established at all? If not and you are in the position to help her with this, please do.
I added my kids to one of my credit card accounts and got them a card for emergencies, around the time they started driving. This helped them to establish credit which has helped tremendously in terms of them being able to buy vehicles etc.
A good credit score is so important.
I had a credit card with a low limit through my primary bank in college and paid it off every month. It was a no-fee card. It gave me a little bit of credit history once I graduated. I still have it in my 30s because it’s my oldest piece of credit history. And the limit increased to something pretty high as I got more income.
As long as you treat credit cards like debit cards and pay them off in full every month they’re not inherently bad.
Look at a secured credit card. You can also add her as an authorized user on yours and it will reflect on her credit report, even if you don’t want to actually give her a card.
I would open one for her just for the purpose of credit age is so important and impossible to speed up. I had a credit card in college and barely used it since my parents always warned me about credit cards, so i stayed away from it till I got interested it in more after college. Four years of credit history set me up incredibly nicely, with very minimal work. Time is one of the hardest things with credit scores, why not set her up?
My friend added her kids to her Discover card account when they started college and told them to use it sparingly. Once they graduated and started working, they applied for their own card.
It’s not true that you have to have income to get a credit card. They passed out applications in my college dorm.
It is generally a good idea to start learning about credit cards and building a credit history in college. Discover It Student and Capital One Savor Student are two you could take a look at to start. They will probably start her off with a $500 limit and boost that up to $1500-2500 after a few months if she uses it regularly and pays it off.
My dad had me put on his card as an authorized user when I was 18. It let me build credit safely and I had a card for “emergencies”. This was helpful with building independence and teaching how much things cost without needing to make astronomical mistakes .
My parents needed a prescription or for me to grocery shop for them? Use the credit card. I needed an uber home after drinking at a friend’s house? Uber home on the credit card and leave my car there. If they felt like I misused it, I’d have it taken away or canceled (neither happened because I barely used it).
Ended up building me great credit. The only problem is the card doesn’t build history. A secured credit card could work here also
When they were out of state at college, I added my kid as an authorized user to my card and gave them the card with explicit instructions that it was not to be used without my prior permission for anything. That was the first step. Second step was them getting a local bank account and a secured credit card. Third step, after graduating and getting their first real adult job, they had no problem getting their own credit card. They pay it off in full every month and have built a strong credit score.
You daughter is an adult and should be doing “adult things” such as having a credit card. In addition to college she needs to learn how to balance a budget, pay billets, etc. So – yes, you are doing her a disservice by doing everything for her. Although I really applaud that and think it is amazing!
She needs to build her own credit history if she is going to buy an item such as a car or rent an apartment. Having a credit card in her name now allows for that history to be built. Additionally, she should have a credit card for an emergency. Again, in her name and her as the primary.
I added my sons to my CC. Their cards had their names and a $2000 limit. Other than one son using it twice in a vending machine, they followed the emergencies only plan. I worked out of the US while they were in the US, so I wanted them to have instant $$$ if needed.
I got my kids a credit card in college and told them to only put their gas on it. We set it up to pay in full each month. Gas was a fairly stable amount each month and a necessary expense. This way they built credit and got into the habit of only using credit cards for required expenses they could pay off each month. They all have great credit now and responsible spending habits.
If you include her as an authorized user on one of your cards, you can monitor her spending and help build her credit history. I did this for one of my children.
Your daughter should start establishing some credit history now. I have seen posts from people who have a hard time getting their own place who have money but, stayed away from credit cards so, they get turned down because of a lack of history.
As soon as my daughter turned 16 I added her as an authorized user on my Alaska Airlines B of A card. We talked about what she could and could not use it for. We would go through her part of the statement every month and she would Venmo me for her purchases; some things she would buy on the card I would pay for.
When she started undergrad this year, we got her a Student Travel rewards card also from BofA. It has a low limit ($2500 I think), and it had a sign up bonus if she spent a certain amount in the first 90 days. To hit the sign up bonus, I had her buy her own laptop with her graduation gift money. I made sure AutoPay was set up correctly in the app and watched closely as everything got paid on time and in full. (Note: We did hit a snag in that the second month of the card, she didn’t transfer over enough money from savings to checking in her bank account, so her payment failed and she got hit with a late fee of $25. She got it straightened out, but it was a good learning experience!)
We talked about how credit cards work – the companies make money through transaction fees but also in interest, and it’s fine to use credit cards for transactions but NOT to pay interest. We did the math about how much she would have paid for the MacBook if she only made minimum payments on it, vs. paying it off right away, and it was eye opening for her.
We also talked about the idea that if she had $3,000 in her bank account but spent $1,000 on the credit card, she really only had $2,000 in her bank account even though she hadn’t actually paid the card yet.
So far so good. Last we looked her credit score was about 715.
100% recommend letting your college kid have a credit card with the understand that she doesn’t put anything on there that she can’t immediately pay back. Doing it this way teaches the mindset that it isn’t a unlimited fund on money with 0 consequences and also teaches good habits by paying it back immediately, which is great for her credit. Even just owning the card and never using it is better than not having one at all because it gives you credit history/account age, which will look favorable if she needs to lease an apartment or anything later in life. Some places won’t rent to you if you have 0 credit history.
To be frank, if your daughter doesn’t have some sort of credit building by the time she gets out of college, its going to harm her in the long run- especially when her student loans (if she has any) gets reported to credit agencies. By building her up some positive credit, you counteract that hit she is potentially going to take for any student loans and put her in a better position to rent an apartment, lease a car, or anything that might involve credit when she is out of college.
If you are concerned about where to get a credit card that will be fair to her with no income, consider getting one through your bank. At most, they will put a hold that equals the card limit on her checking/savings (whichever you tie it to). That is for if she defaults it as a precaution, but if she doesn’t use it at all or only for emergencies, it won’t harm her account.
You know how the credit card companies got her information, the college sold it to them. They also sold her information to life insurance companies. Your daughter’s personal information is treated as their asset by her college.
If she has other assets, she won’t have a problem getting credit cards. Once she has a job, she will be bombarded.
Now, if you are worried about her establishing a credit score now, then yes, you are hurting her.
Her $5000 invested inheritance is doing a small credit score for her, because it is an asset.
Your daughter seems to have a good head on her shoulders, let her apply for a card. If they see she has no income, they might deny her anyway.
When I was in high school, my mom made me an authorized user for one of her cards to use for stuff like gas and groceries. Later on, I kept it for in case of emergency. I still have it now even though I don’t actually spend on it just because it’s majorly boosting my credit score. It’s super important to help establish a credit history now.
Your job as a parent is to assist your children progress towards becoming mature, independent adults.
You asked:
>Does keeping her away from credit cards for now make sense?
Dealing with credit cards and credit/debt in general is part of being an adult. Help her learn how to handle credit cards responsibly.
She’s like 21? Planning to be a lawyer in a few years? Is there a reason she can’t be trusted to not open credit cards without you “deflecting” for her?
She’s an adult – I’d let her handle her own junk mail. When she has an income she can make decisions about when it makes sense to open credit lines.
I have a credit card my dad started when I was 15 or 16 -initially he was also on the account then eventually was just me. I had an internship at the time so had some income initially. It was a low limit and helped establish credit history so by the time I bought my house in my early 30s (as a single person) I had a good credit score
She will probably want a credit card to build credit.
If she can be responsible with it.
You can teach her how to use it properly and closely monitor it.
I was taught to only put things on it that you can pay off in full every month. Typically I only charged things like gas or food.
By 22 I had a 750 credit score.
She can get a student card from discover or another big bank and have you as a co signer
The earlier she earns to restrain herself in credit card spending the better. The time for the credit card was like 5 years ago if not more. Self regulation best learned earlier on, with many things.
Yes you should teach her to avoid the financial devil. Explain the math and how horrible it can get.
late 20s, my mom helped me sign up for a credit card at 18 and told me to immediately pay off any purchase i make with it. I now have excellent credit while many of my peers are still working to build credit from the ground up. Starting young and with parental guidance also normalized the healthy use of credit cards for me. I thank my mom all the time for having the foresight to give me this head start!
She will need an established credit history to rent an apartment, which presumably is something she’ll be looking into doing soon.
It’s also far safer and easier to learn budgeting by responsible use of a credit card. If she’s currently paying cash for things – the expenses kind of disappear. Debit is OK. But credit cards really show monthly totals (vs item by item alone), and allow easier insights into budgeting and spending patterns. Credit cards also offer purchase protections and other perks. If your strategy now is that she has no money and so can’t spend a dime when she’s not with you – this is really not a great situation for her independence. If she’s a smart girl, you should be able to trust her judgement and showing that you trust her judgment is super important as she gets older.
My suggestion is to sign her up for a secured credit card or a low limit credit card.
No. She needs a credit card, she is an adult. She needs to build credit. She will very soon be wanting to buy a car, sign a lease, and all of the adult things. You can have credit and use it responsibility. People with limited or no credit are at a serious disadvantage in life. She is pre-law but you are treating this as if she was in junior high.
Are you giving her money? Instead have her use HER new credit card and then you can pay the bill.
Stop saying she doesn’t have an income. I’m sure she spends plenty of money and I’m sure it things get paid for.
Like others have said, a credit history is a good thing.
We added my daughters as authorized users to one of our cards in high. They pay for gas and pick up groceries and such with it. My older got a capital one card when she went to college. It’s set to automatically pay the total balance every month from her savings (from high school and summer jobs).
My son is an authorized user on my card for emergencies. We also signed him up for his own card so he can purchase things online. He works winter break and summers. I figured he would get a secured card and was surprised when he got a card with a decent limit that was not secured.
My son is a sophomore in college. He got his first credit card the day he turned 18. Yes, he doesn’t have much income, but I taught him to treat his credit card like it’s a debit card. Never spend more than he has in the bank. This is so he can pay in full, every month and avoid interest. We also discussed how compounding interest works, how that benefits him with investing and harms when borrowing – especially credit card interest rates.
These are things your daughter should be learning as well. Not only are these skills necessary, using a credit card for most purchases is safer than using a debit card that is attached to her actual money. Should someone skim her debit card number, they can wipe out everything she has in checking. The banks generally reimburse for this, but it takes time. If someone skims her credit card number though, it’s not her money they steal. It’s the banks itself. She does not need to wait to get her money back.
You Ya I mean if she’s responsible it’s time. She might need a secured card if she doesn’t have an income to speak of.
You can also add her as an authorized user on one of your cards and give her the card or not. This will also help build her score.