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credit cards
Getting your student a credit card

Financial responsibility

The pillars of good credit card management are universal, no matter if you have a regular credit card or a student credit card.

"No. 1: Pay on time," says Paperno. "Ideally, you should pay the balance in full every month. At the very least, make the minimum payment by the due date."

Parents should walk students through the credit card statement and show what options are available, says Martinez. What happens if you pay the entire balance? What happens if you pay the minimum? What happens if you pay late? Explain the annual percentage rate, and go over penalty and late fees and other charges in the fine print.

If you have serious concerns about your student's ability to handle credit cards, subscribe to a credit monitoring service with the student's permission, says Paperno. Set it up so you both receive alerts and go over how financial habits affect credit. Or, seek help from a nonprofit credit counseling service.

Benefits to students with credit cards

One of the upsides of a credit card is better protections. As an authorized user, your student will enjoy the same card benefits as you. For example, American Express cardholders and authorized users receive purchase protection up to 90 days. Your student's spending also helps earn rewards points if you have them.

And under the Truth in Lending Act, credit card users, even those holding a student credit card, have no time limit to report a lost or stolen credit card to limit personal liability. Debit card users have only two days.

Having a credit card or a student credit card helps build credit history, which is important to your student's financial success.

"Your child should prepare for after graduation, too," says Martinez. "He or she may apply for an apartment or want to get an auto loan. These are reasons to build a good credit history."

Pitfalls of student credit

Because most students have little to no credit history, one small slip-up can cause major damage. Paperno says consumers with "thin" files will hurt their credit score more if they are 30 days past due on a credit card payment versus someone with a robust credit history.

Don't forget to mind credit limits. A student's credit limit is probably low, so while charging $175 on a credit card doesn't seem like much, it will be bad for your student's credit score if the limit is only $200.

Still, it's not a catastrophe if your student isn't squeaky clean. A consumer can recover rather quickly from a misstep like a missed payment or a maxed-out card, says Paperno.

"Definitely within a couple of years you can recover any points lost for a late payment or two," he says. "Sometimes, sooner than that."

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