As your child gets ready for the first year of college, making sure that your child is amply prepared for any situation that may occur is necessary. An important decision is think about is cosigning for a credit card under your child’s name, realize the pros and cons of this decision and the affect that your child’s behavior can have on their financial future.
The Pros of your child having a credit card:
- Easy access to money in an emergency
- If properly used learn the responsible behaviors needed for managing a line of credit
- Building a good credit history over time
If over the years you have taken the time and the steps to teach your child how to manage their finances, the value of money and how the credit system works, cosigning on the credit account can provide your child with an excellent learning tool. If your child handles the account wisely, you will be providing with your child one of the first steps needed for building a positive credit history.
The Cons of your child having a credit card:
- Excessive usage can build up a lot of debt
- Miss payments create bad credit history
- Debt overloads can cause more money going out due to interest payments
If your child not financially disciplined, it is wise to think twice about cosigning your child’s credit account. If your child is an uncontrolled shopper, it may ring up thousands of dollars in debt. As a cosigner on the account, you will be equally responsible for paying off the credit card debt. If you do not, you risk ruining your credit score.
Offering your child the opportunity of having a credit card is a good start to helping them understand the importance of financial management. However, it’s important to fully educate them about the importance of having a good credit history. So, if you arm your child with a credit card without the proper teachings you may both end up in a difficult situation to get out of. Whether you opt to cosign your child’s credit account is entirely up to you so choose wisely.