As the back-to-school season starts, college students will be returning to campus or possibly going for the first time. But thanks to a new reform bill signed last year, they most likely won’t be going with plastic in their wallets.
Last year’s credit card reform bill included provisions to prevent credit card companies from preying on people under 21. Many card companies were heading to college campuses, as students who didn’t understand how credit worked opened accounts and racked up big bills. This led to many young adults ending up with a bad credit score before they even graduated, affecting their likelihood of getting a car loan, mortgage or even a job.
Now, the only way for someone under 21 to carry a credit card is if a parent or guardian co-signs with them or they prove they can make the payments. Many parents want to help their students begin building a good credit history, but don’t know where to start.
According to USA Today, there are several ways for parents to help their students with credit. A parent could add a student as an authorized user to their card. This gives them complete control as they can remove their child if they rack up too big a bill. As long as the child is responsible and payments are made, their credit will improve (as will the parent’s). Another option is co-signing for a credit card, but the news source says that is often a worse option because both parties would have to agree to close the account – something a kid with a spending habit probably won’t readily agree to.