CHICAGO — Parents of college-bound students have a decision to make as offers stream in for their soon-to-depart teenagers.
Should they send their green freshmen off to campus armed with a debit or credit card to learn how to handle money? Or is it better to keep firm control through the Bank of Mom and Dad?
The “correct” answer will vary by family and personal preference.
The Credit Card Act that took effect 2½ years ago made it much harder for anyone younger than 21 to get a card. Gone are the days of card issuers racking up scads of new customers on campus by handing out free T-shirts or rewards points for spring break.
“In the old days, if you could fog a mirror, (you) could get a credit card,” says Adam Levin, chairman and founder of Credit.com, a San Francisco-based company that provides information about credit products.
Under-21s can still obtain a credit card if they have a qualified co-signer or proof of sufficient income to repay the debt. And card issuers still market aggressively to college students, targeting them with prescreened mail offers.
That makes parents, as the likeliest co-signers, more involved in the card-or-no-card decision.
Robyn Kahn Federman, of Rochester, N.Y., says there's “no way” she'll let either of her two daughters have a credit card at such a financially tender age. Her daughter Sarah, who's 19 and about to start her second year of college, uses her PayPal card instead. That lets her mom fund the balance as well as see how she spends her money.
“I don't think anything related to debt belongs in the hands of a college kid,” says Federman, communications director of a marketing agency. “The vast majority are not experienced enough with money or cognizant enough of the risks.”
Some students, though, have shown they're disciplined enough to have their own card on campus.
Scott Gamm, a junior at New York University's Stern School of Business, used his income from freelance work and blogging to obtain a Visa card and then an American Express card recently. He charges $200 or $300 on them monthly and pays every bill in full.
But he has friends who obtained three or four cards within a year and now have big debts to show for their “status symbols.”
“The more credit you have access to, especially at that young age, the higher the probability you'll use that card to finance fancy clothes, restaurants and entertainment,” says Gamm, 20.
With or without a credit card, payment options for students under 21 remain plentiful:
Credit card — solo.
Credit card issuers have differing standards in determining whether an applicant younger than 21 has the ability to make payments. Some may say it's enough if he or she has a job and can afford the minimum monthly payment. That can take the decision out of Mom and Dad's hands.