What College Kids Might Not Know About Credit Cards

You may think your kids are prepared to go off to college and make all of the right choices. However, statistically, many college students are not as knowledgeable about personal finances as parents may think. For many kids, they have relied on mom and dad to make financial decisions on their behalf and in many cases, some kids who do earn their own money have no real idea of how to manage it properly.
 

This can be dangerous for two reasons.
 

1. Many parents will provide their college kids with emergency credit cards but not teach them the responsible way to use it or the consequences that will result in misuse.
 

2. College campus are alive with credit card kiosks that offer free t-shirts and other merchandise in order to entice newbies into applying for a credit card. Without proper financial know-how, kids can get themselves into a big money mess in no time at all.
                       
So what is it that kids don’t understand? Here are some common areas college students misunderstand credit.
 

Everything Charged is Free
If only it were that simple, the world may be a better place. But, alas, that is far from the truth. However, since many kids parents are the ones getting the statements each month, kids may not understand that the pairs of sneakers and endless pizzas they have paid for on credit also accumulates interest and penalties and fees. They also fail to realize that if they fail to make a payment each month, their credit can essentially be destroyed by one too many pizzas.
 

Credit Reports Are With You for the Long Haul
Many young adults have no idea what a credit report is or that it will follow you for a lifetime, especially a bad one. Teaching kids the basics and the real-life consequences of bad credit may be able to clue them in as to their responsibilities when using a credit card. College students need to understand that what they do or don’t do know, can come back to kick them in the butt 7 to 10 years from now.
 

What Constitutes an Emergency?
Parents often hand over a credit card and tell their child to only use it in an emergency but will fail to describe what actually would be an emergency. For some kids, an emergency might mean that they ran out of beer for the frat house but for parents an emergency means they need to buy books and materials to pass a class. Parents should provide a list of suitable purchases in conjunction with the credit card and have a talk about expectations from both sides.
 

Financial Information Needs to Be Confidential
Young adults talk to each other about all kinds of things. For this reason, many students may not realize that in meeting all of these new “friends” there needs to remain some level of confidentiality. Students need to understand that passwords and account information should not be passed around to everyone. Kids need to understand it is not okay to give your sorority sister your credit card to run to Walmart. While your new friend may be the most trustworthy person on the planet, you might only find out the opposite when they stick you with a large credit card bill and leave you stranded in a really bad situation.
 

Without parental intervention, college students may seriously be at risk for life-long debt. Parents should not wait too long to begin educating their children on finances. Even taking a young child to the bank each week to make their own deposit can help enforce the importance of saving and spending wisely. If you are prepared to arm your college student with a credit card, make sure you are also arming them with good financial common sense.

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This entry was posted on Friday, December 12th, 2008 at 1:45 pm and is filed under Card Security, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.