Establishing good credit is a necessary step in the process of becoming financially independent. Good credit can help your student qualify for loans, land a job and rent an apartment. Credit also affects interest rates and insurance premiums and can have an impact on many different financial decisions for years to come. When used properly, credit cards are a great way to help your student begin building good credit. It is important to examine the varies ways both you and your student can use credit cards effectively to build good credit and develop financial independence. Here are some ways to help your student get started:
Allow your student to be an authorized user on your account. This is a popular choice for families because they have the option to monitor spending and help their student establish excellent repayment habits. Plus, if you have good credit, your student’s credit score gets a boost too!
Get your student the right credit card. If you feel your student is responsible and ready, encourage him or her to manage his or her own credit card. Student credit cards (link to: https://www.applefcu.org/CreditCards/Platinum#tab4) are typically a great option for first-time credit card users. Student credit cards are available for consumers who want to build credit, but lack significant borrowing history. Encourage your student to look for a card with a wide variety of benefits, but to also focus on a fixed-rate card with no annual fees and reasonable credit limits.
Use the credit card for occasional, small purchases. When starting out with a credit card, encourage your student to use it for small, recurring charges. Think of regular expenses, such as groceries, gas or reoccurring subscriptions, like Netflix. Your student will want to use the credit card for charges that he or she will not have a problem repaying at the end of the month. Frequent and extravagant shopping trips can send credit card debt out of control faster than you could imagine.
Avoid big-ticket buys, except in case of emergency. Remind your student that having an emergency fund is important. By keeping credit card charges low, in the event an emergency expense pops up, they’ll still have plenty of their credit line accessible. If their car tire blows out or their cell phone breaks they can purchase a replacement without exceeding their credit limit.
Pay off the balance each month. Establishing good repayment habits early is key to avoiding future credit card debt. Encourage your student only use the card for purchases they can afford and pay off at the end of each month.
For many families and students managing money is an overwhelming and intimidating discussion topic. Discussing financial independence, however, is an important step in assisting your student achieve his or her financial goals. Ultimately, responsibility is the key to positive credit card management.
Since 1956, Apple Federal Credit Union (FCU) has been committed to helping students. We offer fast, convenient and reliable financial options. We’ll help your student understand the value of saving, earning and borrowing. With Apple FCU, your student will have access to the largest credit union branch network in Northern Virginia, including a branch on the Mason Fairfax campus and ATMs on all campuses. Plus, access doesn’t end away from campus. Apple FCU offers access through mobile and online services and access to more than 53,000 surcharge-free* ATMs nationwide.
Senior Communications Specialist
Apple Federal Credit Union
*Other institutions may impose a foreign ATM fee surcharge. Membership eligibility required. Federally insured by NCUA. EOL.