<p>My D will be 18 and a freshman attending UCSD. I was thinking of getting her a credit card to start establishing her credit history. Then I'm assuming I should open some type of bank account for her so that she'll have access to cash. She's very responsible. One footnote though is that she's not that accustomed to carrying valuables and might "misplace" her card. A few Qs:</p>
<p>1) Aren't credit cards the primary (only?) way to establish credit? Debit cards will not help her establish credit right?</p>
<p>2) Any recommendations on credit card companies?</p>
<p>3) Should her access to cash be a card tied to a checking account? Are there other options? </p>
<p>4) Is there anything else I should consider about these credit and banking matters?</p>
<p>While a credit card is the easiest way to establish credit, it is also harder to get for an 18-year old now. You can also try to purchase something with regular installment payments (I bought a dishware set at 18 for my hope chest). If a credit card is used, then keep the credit limit low for a while, and tell child to use regularly and pay off within a few months. In the old days, I would say pay it off each month, but many credit cards will cancel a card that is not “profitable”.</p>
<p>" but many credit cards will cancel a card that is not “profitable”."
that couldnt be more wrong, credit card companies make money everytime you buy something from a retailer
you cant establish credit on debit cards
doesnt matter, at this point, the one that approves you matters; just make sure there is no annual fee and rewards if youre lucky
not sure what you mean, i have a checking account, debit card and credit card which automatically withdraws from my checking account each month; works well for me
pay on time, never pay any monthly fees for checking accounts; you can almost always find a bank that has free student checking.</p>
<p>(“but many credit cards will cancel a card that is not “profitable”.”)
that couldnt be more wrong, credit card companies make money everytime you buy something from a retailer.</p>
<p>I know that they make money that way, but I also had credit cards that were cancelled for lack of activity and lack of balance in the last two years. </p>
<p>To OP: Is your child going to be flying to/from school? Travel miles are not a bad idea. Otherwise, look for cards that give you cash back, extended 0% APR and low rates for cash advance.</p>
<p>While a person can’t go back in time, what helped my son was “looking ahead”.
When he got a car in high school we deliberately financed a portion of it with his name as the primary, and us as the secondary.
He paid off the small loan on time and had some degree of good credit established even before he turned 18.</p>
<p>If you are able, secure a credit card with a low ($500 - $1,000) limit, and lay down expectations with her, for its use…(allot a monthly allowance for routine expenses to be charged and/or have her reserve the funds for emergency use). There are plenty of options with no annual fees, which also offer a bonus points system. </p>
<p>Shop around locally - credit unions and community banks in your area. You may even find one-stop shopping which will afford you the opportunity to open a checking/debit account and a bank-issued credit card. My debit card is also a charge card… tied to my checking account.</p>
<p>As for her access ot cash - You could get her an account with just an ATM card, so she could only withdraw cash, rather than a debit card where she cuold withdraw straight from checking, but that’s not a very smart idea. Mainly because with a debit card you’re only withdrawing what you actually need to spend on that purchase. So if she’s in a Starbucks, she’ll pay with her debit card and only the $3.50 that the coffee cost will be deducted. With an ATM card, first she has to schlep to the cash machine, then she can usually only withdraw in units of 20, so she gets $20, to buy a $3.50 coffee and then she’ll just have a bunch of ready cash on hand that she’ll probably end up blowing on something she doesn’t really need or want just cause it’s close by. It makes it harder to keep track of your purchases IMHO.</p>
<p>You are definitely taking the right approach by shopping around for credit card providers. You may want to start with your local bank or credit union. Terms vary widely, and parents and students need to clearly understand terms. A new Federal law recently went into effect which puts some strong controls on what credit card companies are able to do in regard to marketing to college students. The new laws are very favorable to parents concerned about their student’s credit card use.</p>
<p>but planning to pay off student loans a yr after graduation is not likely to be much help to an 18 yr old entering college.
If the 18 yr old graduates at 22, then takes a yr to payoff, then now he’s 23.</p>
<p>The new credit card legislation passed earlier this year makes using a credit card to build credit more difficult. Most individuals under 21 need a parent or guardian to cosign, so I think it does not build your kid’s credit to have the card. There are exceptions if the person under 21 can prove sufficient income, I think.</p>
<p>At some point your kid may have an apartment in college. If the utilities are in their name and they are paid on time, that can help build credit. However, there is always the risk that the roommates won’t pay, and your kid is stuck with the bill.</p>
<p>“Building credit” is slightly overrated, and often used by those selling financial products as justification to take out a loan or be issued a credit card that you might not need otherwise.</p>
<p>Lack of credit history (which is different than a poor credit history) can hurt in one of three ways:</p>
<p>1) Make it harder to get a home loan (not a concern at this point)
2) Maybe make a car loan more difficult. Likely not to be a concern until she has steady income, which probably means after graduation. Even then, there are lots of places that are very interested in making car loans even to those with no credit history, as long as they have steady and verified income.
3) Cause her to put down deposits when renting an apartment. While more money up front, deposits are almost always refundable.</p>
<p>Misusing a credit card can lead:
Tens of thousands of dollars in charges
Bill collectors
Ruined credit (which will increase car insurance and make it more difficult to get certain jobs)
<p>One thing to think about banking is how to make it easy for you to get money to your kid. We all bank at the same bank so that I can transfer $ to her account online–no fuss, no muss.</p>
<p>Our kids got the BofA Campus Edge package when they went off to school. Checking account, debit card, low limit credit card in their own name. Of course, this was all before the new banking regs.</p>
<p>We told our D’s to charge something every month and pay the bill every month. Older D had a great credit score that helped her snag some good financing for the car she bought a year after college graduation.</p>
<p>We also got my son the BoA CampusEdge checking account and do our personal banking at BoA, so managing the account is easy.</p>
<p>When he started college, we got him a credit card on our account. He will be attending graduate school this fall, and we just went to BoA to get him his own card this week. His purchases have been $100 per month or so on our family credit card, for groceries, gas and auto repairs and probably some books. Everything else, came from his checking account. </p>
<p>He will have a salary as a research assistant at grad school, so it is now time for him to begin paying all his own expenses and establishing his own credit.</p>
<p>BoA rep told us that the bank may come back with a counter proposal, such as a partially secured credit card or co-signor. Even at age 22 and having an income, they are very restrictive.</p>