The seriousness of credit is something our youth should learn early. The idea of borrowing money is something that should not be taken lightly. The government is also viewing the business of credit in this way. The Feds now require a co-signer or proof of income for anyone under 21 requesting a credit card. They have also placed some limits on the marketing of credit cards to students. The issuers are no longer allowed to use free gifts or other freebie enticements on college campuses to draw students into applying for credit cards.

A few questions come to mind. Are credit cards, in the hands of students a negative? Is it a persons age that determines whether or not they will be responsible with credit? The skills do not just appear once a person has reached a particular age. It seems to me that what people really need is more education on how to responsibly borrow money and some actual experience handling credit. Its important that students get this much needed experience, but in smaller doses/credit limits. Many card issuers have specific student credit card designed to help the less experienced college student gradually learn responsible money management.

Credit Card Co-signer
The idea of cosigning is having a parent or guardian agree to backup the account. They agree to take on the responsibility of the debt if you fail to pay back the borrowed funds. In the case of a student, the cosigner is generally a parent or guardian. The decisions of the borrower and the co-signer will affect one another while they are in this arrangement. If one person defaults on a loan, it affects the credit score of both individuals.

Credit Card Interest
The highest cost to using a credit card is the interest rate. It’s typical for student credit cards to have a higher interest rate due to the higher risk of default. Clearly the lower the interest rate, the better off you will be. The interest rate is applied to the outstanding balances on the account. As the person proves they are able to responsibly manage credit, lower interest rate may be applied. A credit card agreement is a contract. Like all contracts, you should take the time to clearly understand the conditions and terms you’re signing up for.

Education is the first step to learning how to responsibly manage money. Add to this some experience and your well on your way. If you would like more resources for credit card education, try the online tutorial at The ABC’s of Credit Card Finances provided by The Center for Student Credit Card Education…free registration.

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