Credit cards and young people don’t seem to mix well. We all know the story of the teenager that goes off to college, gets their first credit card, and before they know it they’re in a mountain of debt with no way out. That story is all too common.
I’m sure many of you relate to this story whether it was you, a friend, or your own child that ended up in a debt. But it doesn’t have to be that way. Below I share my 5 step action plan to help ensure your kids are ready for responsible credit card usage. While that doesn’t mean your kids won’t make expensive mistakes it will lessen those mistakes and help them stay accountable for their actions.
5 Steps To Get Your Student Ready For A Credit Card
I’m a big advocate for teaching our kids financial responsibility from a young age. There is a way to ensure that your students are ready for a credit card of their own, and it involves step by step planning from the time they enter their teenage years.
1. Set them up with a savings account.
Before they learn how to spend, they need to learn how to save. This is helpful because it will also provide them with an emergency fund or safety net should they need it.
2. Start with a prepaid card.
When your child is ready you can look for prepaid card options. Most are geared towards teens or adults-so you have to add your child as an authorized user. Avoid using gift cards as they are like cash-if they’re lost there’s no value.
3. Switch to a debit card.
Now that they’ve proven they can save and spend within a budget you can move their spending money over to a checking account and give them a debit card. This will allow them a little more flexibility. Set it up with overdraft protections in place. Many banks offer the option of not allowing overlimit transactions to go through.
4. Make them an authorized user on your credit card with limits.
If they’re still taking the right steps it’s time to move on to adding them as an authorized user to your credit card account. Just be sure there are clear guidelines about what they can use it for, and set a limit on their account usage to keep them in check.
5. Help them secure their own credit card.
Now that they’ve been through steps 1-4 and they’re heading off into the ‘real world’ it’s time to set them up with their own credit card. Help them find a credit card that makes sense for them. They may need a cosigner on the account, so be sure if you are joint owner be sure you understand all that entails.
What do you do if your student is already in debt?
What if your student is already in over their heads? Don’t worry. If you already have a student with a credit card that’s maxed out it’s not too late.
- Have them destroy the card. It seems harsh, but it’s effective. You can always order a replacement card later once the debt is paid off.
- Keep the account open. Closing the account is a bad idea. Even if they’ve been late on payments-keep it open.
- Don’t bail them out. It’s tempting to pay it off for them, but it will teach them nothing if you do that. Instead work with them to come up with a payment schedule and plan to get out of debt.
What card should your student use?
What card should you pick? There are a ton of options out there, but one I have my eye on for my teen is the Discover it chrome® for students. It offers great rewards and all the features we love as Discover cardmembers.
Discover it chrome Rewards:
This card has some serious rewards. You can double your rewards at gas stations and restaurants with 2% Cashback on up to $1,000 in combined purchases each quarter. Additionally they’ll earn 1% Cashback on all other credit card purchases.
Disclosure: This post is sponsored by Discover. I was compensated for my time as part of the Discover Preferred Blogger Network. All opinions are my own.