Setting Your College Kid Up With a First Credit Card

By Uloop Guest Writer on September 18, 2017

There are loads of college students around the world, and many of them have at least one credit card. If you’ve been to a first day of college, either as a student or to help your student move in, you’ve seen credit card kiosks sitting around on campus, offering introductory deals to students as they explore campus for the first time.

These offers can sometimes be pretty irresistible. Cashback, juicy rewards, free swag — it’s all available just for signing up. The card, once it arrives in your student’s waiting hand, then holds tremendous potential all on its own. It’s instant gratification purchasing power, perhaps for the first time in the life of your child/student. We can’t stop our kids from getting credit cards, nor should we. What we should do is help prepare them for the responsibility of owning a credit card.

There are many great student credit cards in Canada. All of them can be used to build great credit, but they can also be used to get into debt. Here are some of the best ways for a student to learn to use a first credit card the right way.

1) Pay Off the Balance. It’s important for a student to understand that a credit card isn’t free money. Purchases made on a credit card must be paid back in a timely manner, or high interest rates start to add to the total price paid for each borrowing instance.

A good habit to get a student into is to pay off the balance each month, starting from $0 every 30 days. By doing this, the student will never have to pay interest at all. If your student does choose to pay interest or is unable to avoid it for one reason or other, then make sure that paying off the balance is a priority.

2) Understand Interest Rates. A student is unlikely to pay off a credit balance quickly if they don’t have a strong grasp of what interest is. Interest, you can explain, is the money you pay for the privilege of borrowing money. It’s also the extra money that the creditor takes in, just in case the student defaults on the credit. The less money is borrowed, the less interest is paid.

3) Understand Debt. Many students don’t have a firm grasp of the way that interest feeds into debt. Debt compounds, just like wealth does in valuable investment accounts. Once a student is in debt, it’s easy for the debt to spiral out of control. As an adult, there’s not necessarily anyone to help once that student is caught in the debt web. Debt is much easier to prevent than to cure. Help your student do just that.

There are many ways that credit can go right and wrong. Without knowing what to prepare for, a student is liable to incur too much debt with a credit card. But by helping the student to understand the ins and outs of credit, you can set them up for success and a healthy credit record.

pixabay.com

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