💳First Credit Card? – How to start smart in college
Oh man to go back to that first tap of a credit card… it all feels like free money…. until that first bill comes! If your child is thinking about acquiring their first card this fall, here’s 3 things to focus on to jumpstart their finances in a beneficial way:
1. Start with a student credit card
Student credit cards are specifically designed for young adults and people new to credit. These cards typically have lower credit limits and fewer rewards, but they can help your child build their credit history if used responsibly. Responsibly is the key term here. While building a credit history can help them boost their score, missed payments or carrying a balance can have an even greater negative impact.
Look for a card with:
- No annual fee (or a low fee)
- Low interest rates
- Student-friendly perks, like cash back or discounts
2. Pay your card (In full) on time
Just making the minimum payment isn’t going to cut it! In carrying a balance on the card, you’re still the credit card companies’ best friend: paying interest typically at an astronomically high rate above 20%. It’ll be important for your child to pay their credit card bill on time to build a responsible payback history. Ensure your child sets reminders and automatic payments to ensure they never miss a due date.
3. Make credit monitoring a game
Many credit card issuers offer free access to a credit score through their online portals or apps.
Make it a challenge for your child to watch their credit score grow as they responsibly make payments in full each month. Building a solid credit history takes time. But celebrate the wins of slowly growing a score along the way. Consistency in making payments on time and maintaining low credit utilization is key to building credit. This is why it’s so critical to start early.
A first credit card is a pivotal step in your child’s financial independence. But by doing the little things right: starting with a student credit card, keeping balances low, and making payments of the full balance due on time, your child will be on the fast-track to strong financial footing.
All the best,
Andrew Holmes, Certified College Planning Specialistâ„¢
Andrew@PlanWithFPS.com
617-630-4978
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.