When to get DS a credit card?

[GinaPagnato]

Last summer I looked into getting him a credit card so that he could work on establishing good credit during his first year in college. The bills come to me, and I pay them. He uses a debit card linked to his bank account for his smaller expenses like going out to eat with friends, coffee, etc. I was told that he didn't qualify for a credit card since he had no real income. Fine. We got him onto our account, and he used the card I sent with him.

 

I guess since his name was on the card and all bills were paid, he's now eligible for his own. I have zero concerns with him amassing debt. We know everything that he's buying, he has no problems with this, etc.

 

So my question is, should I set him up with a card in his name (through our bank, which is now soliciting him with applications), or keep him on our card as an authorized user?

 

He still has little to no income as a full time college student. But, I'm thinking this will help him to establish his own credit when he's on his own???

 

What do you think?

[regentrude]

Banks have tightened their credit card rules and it is now very difficult for a college student to get a credit card without having an income. I would have him keep the card that is on the parent's account, and have him apply for his own card as soon as he can truthfully answer the income question.

 

Our kids are authorized users on our account, have cards in their name linked to our account, and this already builds them credit.

I would hesitate to encourage a student to lie on the credit card application.

Edited August 2, 2016 by regentrude

[SparklyUnicorn]

Yes, don't do it.  Keep him on your account until he has steady income.  BTDT it did not end well.

 

 

[creekland]

Mine have gotten their own credit cards sophomore or junior year after they've had an income via work study jobs.  Discover is a great one to start with.  They're more college friendly than most and have great customer service too.  They aren't accepted everywhere though, so mine add on a Visa as well.  Neither have annual fees.  Their interest rate is higher to start with, but that's understandable with "new" users IMO.  They don't pay interest anyway since they keep their cards paid off.

 

We've had no problems and they have built up decent credit scores of their own.

[Gwen in VA]

Dd2 has two credit cards -- one on our account and one on her own through her bank.

 

Generally she uses her credit card.

 

She uses our card only for those things that we would pay her back for -- filling OUR car, buying milk at the grocery, etc.(which is convenient since it minimizes family finances confusion).  Our card is also available for emergencies.

[Pawz4me]

My understanding is that it's very difficult for a full time college student with little/no income to get a credit card in their own name before 21. After that it's supposedly much easier. Our boys are authorized users on our credit cards and it has helped them build very good credit scores. I also understand that when applying for a credit card in their own name some credit card companies consider credit scores built as authorized users on a parent's account and others don't. Our oldest is only 20, so we're still a few months away from him possibly trying to get a card in his own name.

[Alessandra]

Whatever you decide about his own card, I would continue to keep him on yours. I think it should help his credit score. Scores count length of time -- so having a long history on a card is a plus. Also, if he has two lines of credit available, he will be utilizing a smaller percentage of his credit, which is also good for credit scores. Lastly, if one card should get hacked, he would still have a way of getting credit.

[Alessandra]

dp

Edited August 2, 2016 by Alessandra

[Ms Brooks]

I have two college age kids. One is excellent with money. She has a credit card with her name on my account. Very responsible kid. No worries. Her big brother also has a credit card with his name on my account, and I have taken it away several times for overspending. Are these two related??? He has no concept of how much he spends using a credit card. It is a maturity issue.

 

We get solicitations from banks all the time. I throw them away even for my good money manager. Only when my good money manager has a steady job, pays rent, and can float a credit card on her own will I advise her to get her own card in her name separate from my account. Good credit is too valuable to squander at a young age. 

[GinaPagnato]

Banks have tightened their credit card rules and it is now very difficult for a college student to get a credit card without having an income. I would have him keep the card that is on the parent's account, and have him apply for his own card as soon as he can truthfully answer the income question.

 

Our kids are authorized users on our account, have cards in their name linked to our account, and this already builds them credit.

I would hesitate to encourage a student to lie on the credit card application.

 

I hadn't planned on having him lie on the application.

[regentrude]

I hadn't planned on having him lie on the application.

 

But then the original question is mote, isn't it, since credit cards are no longer issued to students without income and the application asks for the income.

Edited August 2, 2016 by regentrude

[GinaPagnato]

Okay, this is helpful.

 

I suppose I thought that if our bank was sending him credit card applications, this was a good thing. But as I read the application thoroughly, it seems they want his gross monthly income. He only works in the summers and it isn't that much money. I'm guessing he'd be denied credit anyhow, since he has little income, even if you spread his summer earnings out throughout the year.

 

I didn't know students build up credit just by being on their parent's card. That's great! Probably it's also why he's getting these solicitations.

[GinaPagnato]

But then the original question is mote, isn't it, since credit cards are no longer issued to students without income and the application asks for the income.

 

Haha, we posted at the same time. Yes, you're right. In my answer I just submitted I explain his income situation.

 

Thanks for the advice! We'll just keep him as an authorized used on our account.

[SparklyUnicorn]

Some credit cards allow you to count reasonable sources of income other than jobs.

 

Glad they have made it a tad more difficult.  When I was a student the CC companies would park themselves in the student center and sign people up.  Their requirements were extremely minimal. 

[Arcadia]

I am an authorised user on all of my husband's cards since I do most of the purchasing. However, I would not be able to get an unsecured credit card without a HR letter or a W2.

 

But then the original question is mote, isn't it, since credit cards are no longer issued to students without income and the application asks for the income.

Secured credit cards don't need proof of income but does have annual fees. That was what I have while on a H4 visa.

[SparklyUnicorn]

I am an authorised user on all of my husband's cards since I do most of the purchasing. However, I would not be able to get an unsecured credit card without a HR letter or a W2.

 

 

Secured credit cards don't need proof of income but does have annual fees. That was what I have while on a H4 visa.

 

Again, depends on the company.  I just got my own card.  I counted my husband's income as mine and they allowed it. 

[SparklyUnicorn]

I went and read the specifics of this.  It used to be that credit card companies could issue cards to anyone.  Then in 2010 they were required by law to verify ability to pay back the borrowed money.  This was intended to control predatory lending to younger people especially.  Then in 2013 they amended this rule to state that credit card companies could consider sources of income other than employment such as someone counting their spouse's income. 

[Mom22ns]

My kids have what yours already has. They have a debit card on their account and a credit card in their name on my credit card account. I see no need for more than that, but we aren't big on credit.

[G5052]

I got a shared one for my oldest last fall. He's in college locally, but I needed him to buy his own gas, handle doctor co-pays, etc. I told him it was fine to use it for personal things as long as he told me and paid me back right away, which he has. Occasionally I'll send him on an errand and have him use it to pick up something for me.

 

Our credit union said they'd issue him his own card once he was working and had held the same position for three months. He didn't work last school year because of medical issues, and I told him not to find a summer job because I thought we'd be travelling a lot. It ended up that we had to cancel our July and August trips, so he was stuck job-hunting in July (not good). Thankfully he contacted one employer again last week and just got hired, so hopefully he can his own card from them in November.

[HomeAgain]

May be the unpopular opinion, but I believe you're walking a fine line between helicopter and good parenting.

 

The direct question is why would you get him a card and not him do it?  The answer is because he's a college student with little income and cannot.  That right there tells you it's a big no.

 

Whether or not you add him as an authorized user to a card you have is up to you, but for the most part it's still a bad idea.  A debit card should suffice to give him spending power without overspending.

[Sunshine State Sue]

Our kids are authorized users on our account, have cards in their name linked to our account, and this already builds them credit.

How would I check ds's credit rating?

[MerryAtHope]

Whatever you decide about his own card, I would continue to keep him on yours. I think it should help his credit score. Scores count length of time -- so having a long history on a card is a plus. Also, if he has two lines of credit available, he will be utilizing a smaller percentage of his credit, which is also good for credit scores. Lastly, if one card should get hacked, he would still have a way of getting credit.

 

We just added our son to our card (for an upcoming trip he's taking, but it will be handy for other situations too). They explained to me that people you add to your account are not responsible for the charges, the original account-holders are responsible. So that made me wonder...if the student isn't responsible for paying the charges, how could it help his or her credit score? I googled and found this article (which does a nice job of laying out some teaching ideas and some of the possible cons to adding a student to your CC)--anyway, it said this:

 

 

 

Some issuers may not report authorized users to the credit bureaus, which is a drawback because authorized user status can help a young adult build a strong credit history.

 

So, a student may or may not be building credit history as an authorized user on a parent's card.

 

I think there are situations when it makes sense to add a child as an authorized user to a parent's card. I don't think it really makes sense for a student without a job to have his or her own card though. 

[Pawz4me]

How would I check ds's credit rating?

 

One of our credit cards (on which the boys are authorized users) offers free credit scores.

[Arcadia]

Then in 2013 they amended this rule to state that credit card companies could consider sources of income other than employment such as someone counting their spouse's income.

The unsolicited forms I received from AMEX, Well Fargo, Chase ask me to supply my W2 and/or alimony. So they consider alimony but not spouse's income.

A SAHM friend did get hers from GAP when they were lax about it. She used to buy lots of her kids clothes from there.

[regentrude]

How would I check ds's credit rating?

 

like you check your own, with the credit bureaus

[AngieW in Texas]

We had all of our kids get a credit card in their own name at the bank when they turned 18yo. It wasn't any problem with the bank. None of my kids had an income at the time (although my middle dd had had a job for a full year that she had to quit right before college started) and it wasn't a problem. The cards just had low limits of $1000. All of my kids have had checking and savings accounts at the bank since they were 13yo and in order to get the credit card, they had to have both a checking and a savings account. 

 

The purpose of the card was to be able to buy their textbooks at the campus bookstore without us being present. While at school, the expenses that we (the parents) were paying for the kids went on the credit cards. The bills came to the house and we paid them off each month. The kids used their own debit cards to pay the expenses that were theirs to pay.

 

We didn't have any problems with abuse of the card. When my kids wanted to buy something online that would be part of their own expenses, they told us in advance and transferred money over to us to pay for it and then used the credit card. My oldest has been completely on her own with her card for the past two years since she stopped going to school and is completely responsible for paying it on her own. She rarely uses it for anything except online purchases. My middle dd is also on her own with her card since she graduated college in May.

 

[Paper In Fire]

The whole of the original post by Gina worries me. In my opinion, a young adult needs to learn personal finances by way of living within his/her means. Credit cards do not foster this mindset, whereas paying with cash does. After you get into the habit of living within your means, a) You would be responsible with credit and, b) the whole notion of having lines of credit and debt would seem rather redundant.  

 

http://www.daveramsey.com/blog/7-characteristics-of-debt-free-people

[Pawz4me]

The whole of the original post by Gina worries me. In my opinion, a young adult needs to learn personal finances by way of living within his/her means. Credit cards do not foster this mindset, whereas paying with cash does. After you get into the habit of living within your means, a) You would be responsible with credit and, b) the whole notion of having lines of credit and debt would seem rather redundant.  

 

http://www.daveramsey.com/blog/7-characteristics-of-debt-free-people

 

Believe it or not, some of us have kids who have been taught personal responsibility and financial management all of their lives. The foundation has been laid and solidified long before they're old enough to even think about a credit card. :)

 

Also, we have found cash back rewards cards to be very lucrative. Between all of our credit cards we will "earn" well over $1,000 cash back this year (as we did last year and the year before). Using cash provides no rate of return and has the risk of loss.

 

I agree that if someone isn't good at self discipline or financial management then a credit card isn't a good idea.

[Pegasus]

DD applied for and received a Discover student card her freshman year. I wanted her to have a credit card to use at the bookstore, to fill the gas tank, etc.  I did have to co-sign the application but the card is in her name and she is building a credit history/score.  One nice thing about Discover is that they provide the credit score for free.  Also, the Discover student card provides a bonus cash back for good grades.

 

DD has always been very careful with money, choosing to save almost all allowance and cash gifts over the years rather than spending it.  She is now working and those paychecks are auto-deposited directly into the bank.  I have no qualms over her having a credit card and actually prefer that she have one and use it now while we still are able to provide guidance.

 

Credit is a tool.  It can be used wisely or poorly.

Edited August 4, 2016 by Pegasus

[Mom22ns]

The whole of the original post by Gina worries me. In my opinion, a young adult needs to learn personal finances by way of living within his/her means. Credit cards do not foster this mindset, whereas paying with cash does. After you get into the habit of living within your means, a) You would be responsible with credit and, b) the whole notion of having lines of credit and debt would seem rather redundant.  

 

http://www.daveramsey.com/blog/7-characteristics-of-debt-free-people

 

We are debt free and financially responsible. We have always lived within our means and taught our kids to do the same. However, few people can manage to buy a house without a loan. Not even Dave Ramsey teaches that you should. If you want a home loan someday, you need a credit history. There is nothing wrong with having and responsibly using a credit card. Just because Dave couldn't do it, doesn't mean no one else can. He works primarily with people who have had trouble handling money. Not everyone fits that bill.

 

My kids both went through Dave's high school program. I'm not anti-Dave, I just recognize that one size doesn't fit all and the original post has no indications that money handling has ever been or will become a problem. There is nothing wrong with wanting to know how to help your child figure out credit. The vast majority of people need it at least once.

[Paper In Fire]

I am not anti credit card, I am anti this.....from the OP:  I have zero concerns with him amassing debt. You don't have to amass debt in order to have a good credit score. Quite the opposite actually. From what I understand, payment history and amounts owed in accordance to the amount of the line are the most important factors FICO takes into consideration when factoring a score. Here's a good trick people might want to try. It takes 1 month for a credit card company to show on the monthly statement that there is a zero balance. Say you pay a credit card off on the 15th and the statements come on the 30th. That zero balance will not show on the statement until the next 30th arrives 6 weeks after the card was paid off.You want to a maintain a zero balance with continued use as much as possible, and continued does not mean constant. So you get 2 cards and alternate their usage. When 1 gets to the point where you can pay it off in 1 month, stop using it and start paying it off while you use the other when needed. Once you have a zero balance, do the same with the other card. Shelve it until it's paid off and wait for the statement to reflect that before you start using it again. Both cards get continued use and both cards will show responsible spending (hopefully) that fosters responsible payments.

 

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

 

Remember, most college students have a limited income from part time jobs. Their spending should reflect that. If they have a $5,000 limit and only make $1,000 a month, which amount should they spend on credit per month? They are young adults now and shouldn't be using mom and dad for this purpose. Only spend as much as you make and the formula above should work. 

 

[Pawz4me]

I am not anti credit card, I am anti this.....from the OP:  I have zero concerns with him amassing debt. You don't have to amass debt in order to have a good credit score. Quite the opposite actually. From what I understand, payment history and amounts owed in accordance to the amount of the line are the most important factors FICO takes into consideration when factoring a score. Here's a good trick people might want to try. It takes 1 month for a credit card company to show on the monthly statement that there is a zero balance. Say you pay a credit card off on the 15th and the statements come on the 30th. That zero balance will not show on the statement until the next 30th arrives 6 weeks after the card was paid off.You want to a maintain a zero balance with continued use as much as possible, and continued does not mean constant. So you get 2 cards and alternate their usage. When 1 gets to the point where you can pay it off in 1 month, stop using it and start paying it off while you use the other when needed. Once you have a zero balance, do the same with the other card. Shelve it until it's paid off and wait for the statement to reflect that before you start using it again. Both cards get continued use and both cards will show responsible spending (hopefully) that fosters responsible payments.

 

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

 

Remember, most college students have a limited income from part time jobs. Their spending should reflect that. If they have a $5,000 limit and only make $1,000 a month, which amount should they spend on credit per month? They are young adults now and shouldn't be using mom and dad for this purpose. Only spend as much as you make and the formula above should work. 

 

 

I took that comment to mean that the OP isn't concerned about her son's spending habits, that she knows he will only use the card for necessary things.

[regentrude]

The whole of the original post by Gina worries me. In my opinion, a young adult needs to learn personal finances by way of living within his/her means. Credit cards do not foster this mindset, whereas paying with cash does. After you get into the habit of living within your means, a) You would be responsible with credit and, b) the whole notion of having lines of credit and debt would seem rather redundant.  

 

 

Credit cards can be used responsibly while living within one's means. In fact, using credit cards can be very smart financially.

 

You can pay off the balance monthly and enjoy the advantages and conveniences of shopping online, paying for larger amounts where carrying cash would be inconvenient, collecting airline miles on all purchases, and having fraud protection.

Using a credit card does not have to mean borrowing money. 

We pay every dime possible with the credit card, pay the balance off every month, and use the miles to travel - this year DS and I flew to Europe with mileage tickets.

Edited August 5, 2016 by regentrude

[Mom22ns]

I took that comment to mean that the OP isn't concerned about her son's spending habits, that she knows he will only use the card for necessary things.

 

Yes. That is exactly what I thought. She isn't saying she doesn't care if he amasses debt. She is saying she is confident he won't. 

[City Mouse]

My DD got her first credit card a couple of months after she turned 21 and qualified on her own. I would not co-sign or have a joint account with her. Her only income was from her summer job.

[Corraleno]

I am not anti credit card, I am anti this.....from the OP:  I have zero concerns with him amassing debt. You don't have to amass debt in order to have a good credit score. Quite the opposite actually. From what I understand, payment history and amounts owed in accordance to the amount of the line are the most important factors FICO takes into consideration when factoring a score. Here's a good trick people might want to try. It takes 1 month for a credit card company to show on the monthly statement that there is a zero balance. Say you pay a credit card off on the 15th and the statements come on the 30th. That zero balance will not show on the statement until the next 30th arrives 6 weeks after the card was paid off.You want to a maintain a zero balance with continued use as much as possible, and continued does not mean constant. So you get 2 cards and alternate their usage. When 1 gets to the point where you can pay it off in 1 month, stop using it and start paying it off while you use the other when needed. Once you have a zero balance, do the same with the other card. Shelve it until it's paid off and wait for the statement to reflect that before you start using it again. Both cards get continued use and both cards will show responsible spending (hopefully) that fosters responsible payments.

 

Her point was that she knows he won't amass debt.

 

I very rarely use cash; I pay off all my credit cards in full every month and, between Costco, Amazon, and AmEx, I earn over $1000 in cash back every year. My son has an AmEx card on my account, which will help him build credit. When he leaves for college, I'll help him get his own account, but it will be linked to a savings account so the full amount is paid via autopay every month, just like my accounts. There are many many advantages to having and using a credit card that have nothing to do with incurring debt.

[Barb_]

Going back the the original question, an authorized user is building credit just the same as someone with his own credit card. My 26yo was approved for a mortgage last year with nothing but authorized user status on my Amex and visa. We put her on the visa at 13 and the Amex at 15 per their policies. Her credit history was already 12 years old when she was 25.

[J-rap]

Beginning when our kids learned how to drive, we gave them each a card linked to our credit card account.  They only used it for things approved of ahead of time, or in an emergency.  Now it's actually really handy because when they're home they can do all of my grocery shopping and errand running and they just charge it to our credit card account.  They also had it once they started traveling independently of us.

 

Sometime either during college or after college, they got their own card.  It was really hit and miss with my kids.  My dd who had done all her university in Central America and hadn't held a job for four years got approved for the first card she applied for after moving back to the U.S.  My other dd who went to school in the U.S., had a good part-time job during school and a full-time job for all summers in-between, with no school loans, could NOT get approval for a card!  It was really strange.  

 

Finally after 6 months she did, but she needed someone at her bank to really jump in and help her.  She finally got it through U.S. Bank.