What You Need To Know BEFORE
You Send Your Kids To College Credit Card In Hand!
It takes 6 months to establish good credit, and one tiny purchase to destroy it. Take for example the story of Jon: your typical college student who charged $68 for a car battery. It was an unexpected expense, and he was glad to have the credit card to pay for it. But being a student is like a full-time job, and Jon got busy. He forgot about that little charge and never paid that little bill.
That $68 car battery ended up costing him close to $600
in accumulated fees and interest, not to mention
the damage done to his credit score.
College campuses are crowded with offers of free credit. Is your student prepared for this responsibility? Do they know how to build good credit? Are they aware that a bad credit score can negatively affect future job opportunities?
This week, we’ve got a back-to-school special! We talked with the RichLife Credit Ladies, Bev and Jan, about the 3 pillars of credit card success.
Make credit card education a priority. Here is the foundation you need to help your college bound student prepare for the realities of credit scores and card companies.
§ PILLAR #1: Pay your bills on time
Most credit card companies offer 3 ways to pay: through the mail, online, or by telephone. Many offer ways to set up automatic online payments. The credit ladies advise payment by mail in order to avoid the fees often associated with instant payments and phone transfers. However, if the bill is due today, by all means pay the fee now and get that bill paid! It will save you the penalties and late fees associated with missed payments.
§ PILLAR #2: Never exceed your credit limit
It’s important to understand what kind of offers your 18 year-old is getting. Their credit limits will start out very small, usually between $150 – $500. In the case of our friend Jon who charged a car battery, one tank of gas and one more unexpected expense could easily put him above his limit. It might make sense to have 2 credit cards: one that is kept for emergency use only, and one that is used and paid off regularly in order to begin building good credit.
§ PILLAR #3: Keep your usage limit under 35%
This is a great rule of thumb for anybody: you want to stay below your credit line, never charging more than 35% of your credit limit. For example, with a $500 credit limit, your total monthly charges should not exceed $175. If you need to carry a balance, your credit score would benefit from dividing the amount on 2 cards so the usage limit stays under 35%.
To help your child establish good credit early, consider setting up a card where they are the co-owner. This is different from giving them access to your card as an authorized user.
· AUTHORIZED USERS are not building credit and not legally responsible for charges
· CO-OWNERS can begin building credit without even using the card
In the words of the credit ladies: ”Credit cards are not the enemy! But the way they are handled can be.” Teach your student how to be a wise steward of their credit. Apply the 3 pillars of credit card success and begin building a sound foundation for future financial success.
Do you want to improve your credit score? Do you have a credit problem that needs an expert? You can talk to Bev and Jan by calling toll-free at 1-800-824-6901 or find them on Facebook at Credit Care Counseling Services.
Do you have a money question you would like to see addressed? Visit me at www.AskBeau.com. Your question will help others, and might even be featured on the RichLife Radio Show!