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Credit Card Tips for Your College Student

These do's and don'ts will help young adults keep from racking up debt

Mother and daughter shopping online with credit card, Help Your College Student to Develop Credit Card Smarts (Blend Images/Getty Images)

Create realistic spending limits and urge your child to stick to those limits. — Blend Images/Getty Images

En español | If you have a young adult heading off to college, now's the time to make sure your student knows how to manage money on his or her own.

Without proper financial guidance, many young adults develop bad money habits in college — and end up paying a big price for years to come. Similarly, being independent offers kids a good opportunity to learn financial lessons that will serve them throughout life.

Share these credit card do's and don'ts with your college-bound son or daughter.

1. DO consider making your student an authorized user of your card

Despite recent federal laws restricting credit card marketing on campuses, students can still be inundated by offers from banks and credit card companies. And it can be tempting for a young adult to sign up for a card — or even several cards — to cover personal and educational expenses.

It's better to encourage your child to turn down those offers, and instead designate him as an authorized user on your credit card. This will allow you to monitor his spending and keep him accountable for any purchases he makes using that card.

2. DO have your college student apply for a debit card

If you don't want your child linked to your credit accounts or you're concerned about his money-management skills, suggest that he get a debit card that he can use to pay his bills.

It's a good way to help students effectively manage their money without worrying about the hassles of writing checks for day-to-day purchases. Still, they do need to keep track of how they use the card, either by keeping a running total or regularly reviewing their online statements. Plus, debit card users can set up email alerts as notifications when their balance runs low.

3. DO consider the benefits of secured cards

If you want your college student to establish a credit history during her college years, an alternative way for her to achieve this goal is by applying for a secured credit card. She can manage that account on her own, or you can serve as a joint account holder.

Just like traditional unsecured credit cards, secured credit cards help people (young or older) build credit by reporting one's payment history to the credit bureaus. But these cards differ from regular, unsecured cards in one significant way.

Secured cards require a security deposit, which then becomes the credit line. For example, if you put $500 on deposit with a bank, that bank can provide you (or your child) with a secured card that has a $500 credit limit.

Parents who are co-users of their child's secured card would have access to that account but could choose not to use it.

4. DO discourage your child from applying for several cards at a time

Suggest to your child that he be selective in choosing which credit cards to apply for, so it doesn't hurt his credit score. All credit card applications show up as hard inquiries on a credit report.

Too many inquiries drag down your credit score, since inquiries stay on your credit report for two years, and they count against you — for the purpose of calculating your FICO credit score — for one year.

1. DON'T overlook student credit cards

If you think your student is responsible with money and can manage to pay off credit card balances before the end of each month, consider the benefits of a student credit card.

These cards offer rewards such as cash back on certain types of purchases or airline miles and discounts for travel.

Just make sure to read the fine print for information about annual fees, interest rates and other terms.

2. DON'T forget to set specific guidelines and spending limits

Whether or not you add your child to one of your credit accounts or you advise her to apply for a separate credit card, it's important to talk to your college-age child about the prudent use of credit and when credit cards shouldn't be used.

It's far too easy to lose track of money spent while in college, with tuition bills each year — not to mention books, supplies, food and other expenses.

Create realistic spending limits and urge your child to stick to those limits. Also, recommend that your child avoid using credit cards for routine day-to-day purchases that could easily be paid for with cash. Ditto for big-ticket items that he or she may not be able to pay off within the month.

Similarly, if you want your child to use the credit card for emergencies only, say so.

Despite the high credit card bills often racked up by college students, those four years spent earning a degree don't have to burden your young adult child with unmanageable debt.

By following the do's and don'ts listed above, your son or daughter can learn lifelong money-management skills and keep credit card debt to a minimum — even while he or she is pursuing a higher education.

Lynnette Khalfani-Cox, The Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and on Facebook.

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