Five Reasons to Push Your Kids to Get a Credit Card

If you are the parent or uncle or aunt or friend of a young adult -- meaning anyone 18-20 -- who will be attending college this fall, you should strongly suggest they get a credit card. Why this advice which flies in the face of the current anti-credit card groundswell?

1. The new credit card law, The Credit Card Accountability Responsibility and Disclosure Act of 2009 will make it much harder for college students to obtain a credit card beginning with the law's effective date (February 22, 2010).

2. Credit card issuers will most likely still be pushing credit cards to college students this fall. Many folks have criticized the aggressive marketing of credit cards to college students and I will address that below. But, as credit card expert Liz Weston says "it will never be easier for you to get a credit card than while you're in school."

3. Credit cards offered to college students generally have a credit limit of about $500. Not small change of course but not cause for super alarm as to irresponsible card usage.

4. Responsible card usage will build up a college student's credit history so that upon graduation, the student will have an established credit score for use in a myriad of ways.

5. Our educational institutions are finally getting the idea that they need to educate incoming freshmen (and upperclassmen) about topics of financial literacy. Hopefully we will even begin to see expanded information given to college students this fall.

Here is my take on this subject: credit card usage is not brain surgery. The issue is self-discipline. If your young adult is not able to create a budget and/or live within his or her means, then you are correct: credit cards are a danger. But so are alcohol and drugs. And unprotected sex. And driving. And joining the military. All of these decisions, your young adult can make.

Our goal should be to educate our young adults about the risks and rewards of living in a credit society. The idea of living debt-free is nice in concept but unrealistic in principle for people just starting out. Debt is a two-edged sword. It can work for or against you.

Let's use our energies and experience not to prevent young adults from having access to debt but rather to educate them as to how to use debt responsibly.

Jim Randel is the author of The Skinny on Credit Cards. For the next week anyone who e-mails [e-mail] and references The Huffington Post will receive a free e-book. As noted by national credit card expert Gerri Detweiler "I love this book. It can literally save you a fortune!"

Comments

[jhgold57]

I take no issue with your premise that 18-20 year olds are young adults (not kids) and that they should be entitled to obtain a credit card "when they are credit worthy". Credit should be extended to young adults who are either credit worthy or whose promise to repay their debt obligation is backed up by a co-signer. Just like anyone 21 years of age or older. The new law allows just that.

Can you believe the nerve of the Obama administration and Congress placing oversight laws in place to protect American consumers??? I only wish it was starting today instead of waiting 9 months before the law takes effect.

And lastly, you just have to wonder who amongst our Congressional leaders is proud of the amendment to the "credit card" law to allow CONCEALED WEAPONS IN OUR NATIONAL PARKS!?!? I'm not so proud of the democrats for allowing themselves once again to be bullied into a devils compromise with the republicans. Maybe one day the democrats won't be afraid of republican filibuster threats and actually pass good law. I would have loved to see which side the American people would have weighed in on between the republicans concealed weapons in our national parks requirement or... a credit card holders bill of rights. Hmmm... I'll lay 29% interest on the dems argument winning the day. Oh well... the dems let the repubs roll over them yet again. Bad news for the American people.

[gallimaufry03]

Okay, I ordered the e-book advertised at the end of this article -- the article that states that college students should get credit cards. In the e-book, author Randel quotes from Kevin Trudeau's Debt Cures:

“Credit card issuers love the college bunch, because they turn out to be one of the most profitable groups of customers for the credit card industry. College students are not screened the same way that all other applicants are. They don’t even have credit reports yet, so a credit score does not come into the picture. All they may need to qualify for a credit card is the simple fact that they are a student at a college or university. The credit card companies know they can get them hooked. Some college students now graduate with huge student loans and heavy credit card debt. It is not a coincidence that 25% of all bankruptcies these days are filed by young people under the age of 25.”

Granted, anyone using credit cards should be taught what the many pitfalls are. But when you know that college students (being young and prone to not listening to good advice anyway, as a group) are statistically disinclined to use debt wisely ... why promote it in the article?

[onwisconsin]

I disagree. Many of my college students end up with one of two issues that affect their performance in school: too much time spent with boy/girlfriends or too much time spent on employment. Both affect their grades and study time. Of course, there are other issues as well (partying, etc.) but these two seem to affect my students most of all because I get them in their junior and senior years when they seem to have most other issues settled a bit.

I think that often students get easy credit and find themselves having to pay off debts while in college that would be better not to have. Why get a credit card and have to make payments so that you must be employed at a certain number of hours to meet your financial obligations? Some of our students will come out of the university with staggering student loan debt as well.

Parents, please spend time with your children teaching them the benefits of living on a budget. College is the one time in your life when you are surrounded by other people totally as a poor as you. Everyone has to find bargains. Almost everyone is relying on parents' support, at least a little bit. They need to be learning how to become responsible adults.

[mikep]

I disagree. Young people should be taught that prudent people avoid borrowing money at all costs, and that they should learn to pay their way as they go. Get them a debit card, which will allow them to make electronic transactions, but only if they can afford them.

As far as it being more difficult to get a card later, I doubt that. The credit card companies need their business.

[Jim Randel - Huffpost Blogger]

Hi Andman: Please note that I have ZERO commercial interest in whether young adults get a credit card ... let me try again: an 18 year old is NOT a kid. he or she can serve in afghanistan. but, we should not allow him to borrow money? is that logical to you? do you think that perhaps if young adults cannot borrow money legitimately other less savory providers (yes, there are less savory types than credit card execs) may fill a vacuum at times. we need to educate our young adults to the pro's and con's of credit and debt ... credit and debt are not evil if employed intelligently - our goal should be to help our young adults learn to use debt prudently and to their advantage...

[Andman0121]

I have to say that as much as I love reading Huffington Post I found this article nauseating in its obvious commercial attempt at getting young people to unnecesarrily buy credit cards. Who is paying to get this crap on this site?

And another thing, what is the deal with this picture? I mean give me a freakin break.

[gallimaufry03]

Could NOT agree more! Kids happily going out to get indebted???

[Rule Of Law]

So wrong in so many ways. Read Boyce's piece today, link below, as to how these cards have changed our entire country and attitudes--and not for the better.

"Not paying back the local store had devastating implications..to your social life...to your life in general, debt laws...were strict. These forces led people to be...fearful of carrying...debt, and the many proverbs reflected...that: "neither a borrower or a lender be, better to go to bed hungry than wake up in debt, out of debt, out of danger." Debt was a serious issue, not entered lightly...with serious consequences.

Being in debt was...extraordinarily negative state of being.

In 1959, federal and corporate debt was a tiny fraction of what is now. As people became used to...debt in their personal lives, they became equally comfortable in their business lives and...their government being in debt.

In 2009, the United States is not facing a "credit" crisis; we are facing a "debt" crisis -- ...fifty years of...debt has delivered us a culture where it is acceptable to spend money we don't have.... Not to mention the increasingly popular word-"swapping" of debt for credit.

So powerful has this change been that today, we are not even studying our current financial crisis with the proper word in mind.Is it possible that this single piece of plastic actually molded our culture?

Yes."

http://www.huffingtonpost.com/james-boyce/introducing-plastic-a-ser_b_206933.html

[quindy]

$500 limit on the credit card does not prevent overspending. We should not encourage young people to get their credit cards while they are at college. They don't earn money and they should spend only cash. If adults have trouble with financial discipline just imagine how hard it is for an immature person.

[zizyphus]

Pay cash whenever possible, kids. Cash is king.

[Sparhawk]

+1

My kids are learning that lesson at 12, 9 and 7. We are teaching them about budgets, cash and the freedom that comes with no owing anything to anyone. I wish I had learned that years ago from my parents.

[zizyphus]

We were all brainwashed by the media into thinking that debt was wealth. The TV is a propaganda machine.

[TJCole]

Debt is slavery, no debt is Freedom...!

[Rule Of Law]

Hear, hear!

[gallimaufry03]

Here, here. I could not disagree more with what the author of this piece writes.

That said, my kid isn't even close to college age so I'm left wondering ... will her credit card opportunities dry up in the next 10 or so years?

And the answer that keeps banging around in my head is "god I hope so."

Go cash kids!

[Mar10]

This article was clearly sponsored by discover visa master card.

"The issue is self-discipline. If your young adult is not able to create a budget and/or live within his or her means, then you are correct: credit cards are a danger."

err put the whole point of credit cards is to pay for something you don't have the money for at that time. a better way to get you people to learn about living in there means is not giving them a credit card so they can budget for the the things they need and want

" But so are alcohol and drugs. And unprotected sex. And driving. And joining the military. All of these decisions, your young adult can make."

Yes these are dangers and I don't many parents will tell their kids to get high and drunk and have unprotected sex because they can learn valuable life lessons

[gallimaufry03]

"Yes these are dangers and I don't many parents will tell their kids to get high and drunk and have unprotected sex because they can learn valuable life lessons"

LOL ... oh well put!

[ThePeacemakers]

Not a bad idea IF INTEREST RATES HAD A CEILING OF ABOUT 15% !!!

WTF?

Parents would lose their jobs and start using the kids' cards.

[gallimaufry03]

Well now there's a thought. Hmmmm.

[KillTheMessenger]

We should give every kid a syringe and a week's worth of heroin supply, too. But we need to tell them to use them responsibly!

:-)

[Rule Of Law]

LOL!

[Isis N]

So sorry, NOT gonna happen for this 20 year old. I'd rather work directly with my parents through my bank accounts for keeping to a budget, and not have to worry about the unfair practices that credit cards use to make profits, especially since the new credit card holder's bill of rights really doesn't do much.

[kanester]

Most of what Randel says is technically "right" (credit cards are not necessarily bad, but abuse of credit from whichever direction is), but I certainly do applaud your approach. It took me about 20 years to get to this place.

You're right about the new bill ... it's a weak effort the Obama Admin and Congress are trying to pass off as an appeasement to voters in order to prop up a bankrupt (pardon the pun) financial system.

[KillTheMessenger]

So if you replace "credit card" with "drug", is most of what he says technically still correct?

:-)

[em0199]

If you understood credit at all you would understand that if you use your credit card and pay the balance in full and on time they will not be able to hit you with these charges. This is what my parents taught me when I was in my early 20's. I am now 29 and have a great credit score and as I got out of college I had credit built in order to be able to rent an apartment and buy a car on my own. Now that I am older I am saving to buy a house which I will be able to do with my good credit score. You can't do any of these things with out any credit built. The key to credit cards is responsibility not avoiding them all together. You won't be able to much of anything in your late 20's with out a good credit score.

[Isis N]

How does ANYONE pay on time if the credit card company issuing the bills can easily change the due dates, and then make it so that the banks you pay won't take payments that are dropped off in person? (Yes, I've watched my parents go through both issues.) Nowadays, it's either pay off your bill at least a week early, or you're screwed!

Better yet, how exactly does this help any college students who don't have income because they can't find jobs? Randel advocates that young adults in college get credit cards, but makes no mention of there being a job or income to back up the purchases.

I'm much happier only buying what I need when I need it, and saving CASH to buy bigger items on my list of things I want.

[Isis N]

Take a look at what ThePeacemakers says... I'm of a very similar, if not slightly harsher mindset. I find the concept of credit abhorrent as it is. Credit = debt to be paid in the future. Am I not better off not living with debt that can EASILY spiral out of control even if I'm responsible?

[KillTheMessenger]

There is no appreciable difference between paying with a debit card and a credit card if you pay your bills early... until you fail to pay early and then you get slapped.

So, OK... now you are sitting on debt to rent (???) an apartment and own a car. What does that get you? Interest payments that you wouldn't have if you paid cash (like me...).

You are not getting a good credit rating for a home loan from paying off your credit cards regularly. You get it from not being in debt at all AND from having a large income. How do I know? By having an almost perfect credit score without using credit cards.

Emo... you talk like a credit card company desperate for business. Maybe you are one?

[Sparhawk]

delay self gratifications and the "Have it now"mentality and don't buy the items(s) until you have the cash.

[zizyphus]

Nowadays all you need is a pulse to get a credit line.

[gallimaufry03]

Good for you!