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Credit Cards 101: Tips For Parents And Students

Credit cards and college students are a dangerous combination.

And with the start of college just days away, there's still time for a quick primer course.

“A large share of students get their first credit cards in college,” says Dr. James Roberts a marketing professor at Baylor University. “They put them in the back of their mind and don’t pay off their balances: It ultimately leads to financial problems in the future.”

Now put this in your notebook because you may be tested on it in life.

Fifty-six percent of college students carry four or more cards, according to Nellie Mae, a student financial aid firm. By senior year, nine out of ten have at least one. The average outstanding balance is $2,864.

Graduating with credit card debt or missing payments can have a negative impact following graduating, affecting your credit worthiness and even job opportunities.

“If you do screw up your credit," says Emily Davidson a financial expert at Credit.com, "it’s going to haunt you for years.”

Given those dire consequences, we've assembled these tips to help parents and students stay out of credit card debt.

Parents

  • Start early. Getting a teenager a credit card while in high school may be a way to build good habits. Parents can and should always watch over the card and sit down to speak with the child every month when the bill arrives.
  • Explain late payments. One of the most common misconceptions among college students is late payments, says Dara Duguay, director of Citi's office of financial education and author of "Please Send Money! A Financial Survival Guide for Young Adults on Their Own.” She says many college students think that if they miss a payment the only consequence is a late fee; parents need to explain that there are also interest charges and that late payments can be reported to credit bureaus, which will damage your credit score (and take several years to repair.)

  • Only one bailout. Whether parents should bail their children out of credit card debt is up to them, but if you do decide to pay of the debt, Duguay suggests limiting it to one time only. Parents also need to explain that it will only happen once, otherwise they will never be financially independent.

Students,

  • Avoid on campus credit card offers. Getting a card from a table on campus, giving out free shirts is a bad move because you’re not comparison-shopping for cheaper cards, says Davidson. Instead, she suggests going to a Website (try sites like credit.com or bankrate.com) to compare different cards and their interest rates to insure you’re getting the best deal.
  • Lower credit limits. If the credit card company ups the credit limit on a card, Duguay recommends calling the credit card company and asking them to lower the limit to an amount you’re more comfortable with. “The more you have available,” she says “the more you’re going to charge.”
  • Leave home without it. “If you feel you need one [a card],” says Roberts, “use it only for emergencies.” He suggests leaving the credit card at home instead of in your wallet to avoid impulse purchases.

As with most money matters, frank discussion often leads to understanding and agreement and this is one case where parents need to take the initiative in educating their children.

"In our culture parents are more likely to educate about the dangers of cigarettes and neglect to warn about the danger of credit cards," says former financial planner Eric Tyson, author of "Personal Finance for Dummies."

Send questions and comments to:joseph.pisani@nbcuni.com