In a few months, your baby will be a freshman in college and you may be wondering what’s the best credit card for a student.
I know what some of you are thinking: What about emergencies?
That’s what savings are for. We should be discouraging young adults from thinking a credit card is a financial safety net. Financial experts advise that responsible credit card use means paying the balance off every month. So, if you are teaching your children this smart financial principle, then how can you turn around and then say they need a credit card for an emergency?
Yes, cars break down. In anticipation of a repair, work with your student to build an emergency fund tied to their debit card to handle an unexpected breakdown.
Okay, you might ask, “But what about the need to build a good credit history?”
This is a fair question. Credit is important for so many financial transactions and in some cases even getting a job.
But will your child need to rent an apartment on his or her own or buy a home while in college?
Since it will be several years before they will need to rely on having a good credit score, encourage them to use their initial college years to live within their cash means. Let them learn to go without some things if they don’t have the cash. Otherwise, they may learn too early to lean on credit to get things they want but don’t need.
As your young adult child gets closer to graduating from college, you can then — maybe — help them get a credit card in their own name. Or, if they’ve been financially responsible you could make them an authorized user on one of your credit cards. However, please understand what this means. You are completely responsible for any charges they make and don’t pay.
On the issue of having someone as an authorized user on your credit card, read this: Piggybackers Take You for a Ride
When the time comes to look for a credit card, start close to home. Inquire about credit card offers with your current bank or credit union. Ask whether they offer special credit cards for students.
Look for cards with no annual fee. You might be tempted to recommend they get a reward card. But such cards often come with an annual fee and to get the perks your child may have spending thresholds to meet, which in turn might tempt them to spend too much. Some of the student cards offer cash back features.
Search for a card that offers a free look at your child’s credit score. And if the student plans to study abroad, make sure the card doesn’t have a foreign transaction fee.
From NerdWallet read: Best College Student Credit Cards of 2018
U.S. News and World Report also put together a list of the best credit cards for students.
But no matter how good the features are on these cards, discourage your child from getting a credit card if he or she isn’t earning enough to pay any balance in full every month.
Color of Money question of the week
When did you get your first credit card and what mistakes, if any, did you make in using it? Send your comments to colorofmoney@washpost.com. Please include your name, city and state. In the subject line put “Credit Card For Students.”
Live chat today
Please join me today at noon (ET) for a live discussion about Social Security. My guest will be Andy Landis, author of this month’s Color of Money Book Club pick “Social Security: The Inside Story.”
Landis is a guru of all things Social Security. He spent 12 years working for the agency, and then he put his insider knowledge to work for himself by helping individuals and professionals understand the labyrinthine program.
Here’s my review of the book: Worried about cuts to Social Security? Here’s the bible on navigating this retirement benefit.
Here’s how to improve your credit score. It’s easier than you think.
Before I left on vacation (had a great time), I wrote about the best way to improve your credit score.
Many people don’t realize that they can improve their scores just by paying their bills on time. The other main way to improve your credit score is to pay down your debt. That’s pretty much it. Do these two things and your score will begin to rise.
When it comes to credit scoring, I asked readers what confuses them the most about the system that measures their creditworthiness.
Bill Devine of Boscawen, N.H., wrote that until his retirement in 2014, he had spent 20 years as the director of career services at a Maine college. One of his responsibilities was teaching “Career Prep,” which included teaching students about finances.
He wrote: “One of the most consistent misperceptions I heard was that ‘my credit score is higher if I leave a balance on my card each month.’ That was something I instantly corrected!”
Experian, one of the three major credit bureaus, backs up Devine. “Ideally, you should pay off your credit card in full every month. Leaving a balance will not help your credit scores. All it will do is cost you money in the form of interest,” the bureau said in advice to credit users.
“My biggest confusion with the credit score comes from our focus on the importance of having a high score,” wrote Devon Brown of North Richland Hills, Tex. “Personally, I didn’t learn about the importance of credit scores until later in life. It seems as though having a good credit score is right up there with a high SAT score.”
Having a good credit score matters when taking a loan, getting insurance and sometimes even attracting a future mate.
Hazel Stratton of Corvallis, Ore., wrote, “I think it is very unfair to not take into consideration that many people save and pay cash for large items and do not make monthly payments. This, in fact, hurts the score. My score is over 800 and there is no way to increase it without taking out a loan, which I don’t need or want.”
Actually if you have a super high credit score, you don’t have to be concerned about reaching the perfect FICO score of 850. Often lenders reserve the best deals for customers with credit scores above a certain threshold, such as 750. So even having the highly sought-after 850 won’t give you an additional advantage.
Like a number of readers Bobbi Bowman, who lives in Toulouse, France, can’t understand why she can’t get her FICO score higher than the high 700s. The FICO credit-scoring model goes from 300 to 850.
“I’m 70 and I don’t borrow enough to keep a good rating,” she wrote. “I’ve often heard that you have to keep borrowing to keep your score high. I’ve never failed to pay on time and I do use my credit cards. But that’s not good enough because I’m not borrowing for a house or a car or lots of other things. I don’t think I can improve my high 700 scores by any other method than to raise my borrowing. Maybe even failing to pay the full balance on the due date would help me.”
Bowman said one of her scores was 780.
As I’ve said, if you have a score in the high 700s, relax. You don’t need a perfect score.
Madelyn Pollock of Austin, wrote, “I’m trying to help my young-adult children build a credit history. Is there any good way except using guaranteed credit cards? They have both been students and are newly in the workplace, but have no history, so can’t get credit. It seems to be an endless loop.”
Here’s one way to build credit: A secured credit card can help to establish or mend credit
“One thing many people don’t realize is that your credit card balance can hurt you even if you pay it off completely every month,” says Kimberly Rotter of San Diego, who writes about credit. “Your credit card issuer reports your balance to the credit bureaus on a schedule that probably has nothing to do with your payment due date. It’s more likely to be reported on or right after your statement closing date, which is weeks before the payment is due. That’s why your credit score could be hurt by a high balance even if you are in the good habit of paying it off faithfully. This is especially damaging if you charge up 50 percent or more of your limit each month. If you max out a card or are close to hitting your credit limit when the balance is reported, that’s a very hard hit to your score.”
Read more: 8 Reasons Your Credit Score May Have Dropped
Color of Money columns this week
Knowledge isn’t power. The right knowledge is power.
Stay informed about your money.
In addition to this newsletter, please read and share my weekly personal finance columns.
Newsletter comments policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)
Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon where she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to michelle.singletary@washpost.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.
Follow Michelle Singletary on Twitter @SingletaryM and Facebook