I’m pretty sure someone made this suggestion upstream (maybe it was you). I’ll repeat my earlier response:
Update: Just recently, now that S has a well paying internship, he was able to increase his limit. D is now working full time is has also increased limits and qualified for a car loan on her own with no problem.
Got both kids their own credit cards from our local credit union where they had their bank accounts. Did this the summer before they started college. I think I had to be a guarantee owner for the card or something like that. Both kids were also authorized users of my credit card for a few years before that. I am sure this helped build up their credit history.
S applied just this past month for a discover card (he only has his summer internship as income). Qualified for it easily - in fact, he said he had to talk to them after he applied and they gave him a 1000$ limit. I haven’t had him apply for any others just yet - figured he might try one of the better cashback cards like Citi or Chase next year. I know D applied for and received a Chase credit card last year.
I tried the Discover student card yesterday and he was turned down. They require more than his $4,000 annual income.
Again. What shocks me is that the banks are reluctant to provide a credit card equal to collateral that they hold. To me there is no risk to the bank at all. I just do not understand. I instructed them to withdraw $500 from his checking account to hold as collateral for a $500 credit line. they still declined him.
Not one bank yet has indicated any interest in establishing a relationship with a college student. Sure wish Wells Fargo was still opening accounts. That company knew how to create customers.
At this point, I will try the co-sign route and if not, then I will just open another account and place him on it.
Why the rush to get a credit card for a college student? My recent grad now has one and had no problem getting one but all through boarding school and college my kids relied on debit cards with zero issues.
The issue for me is building credit for a student so I dont have to cosign leases, loans, etc. after they graduate, putting my assets at risk. My oldest has good enough credit that I didn’t have to consign a lease but a couple of her friends didn’t have a good enough credit score and they had to get there parents to cosign. The house they rent is $10K (it’s a really nice house next to the Presidio) a month, and any cosigner is liable for the whole amount of the lease. I also get my children there own auto insurance policy when they turn 18. A friend of mine’s son t-boned someone and guess what, their insurance wasn’t enough to cover all the bills/lawsuit so they paid the rest by getting a large second mortgage on their house (they were lucky not to lose it). If their son would have had own policy they can’t come after the parents assets, but they can if they’re on your policy.
@doschicos – I wanted my boys to have their own CCs so they could charge their socializing expenses. They have a card of mine for books, transport home, haircuts, Dr & dentist, gas when they are home, etc, but I don’t pay for dining out with friends, concert tickets, and the like. A lot of people use debit cards, but I am not a fan of them, so this is cleaner for our family.
Older son opened his first card soph year of college and younger son just opened his last month when he finished high school.
@CU123 —good point about co-signing leases. I had not even considered that, even though my father had to co-sign my first Manhattan apt lease. I do carry umbrella insurance and the boys and their car are named on it, so I think I am covered for the situation you describe. I wonder if it would be less expensive for you to carry umbrella coverage instead of placing your children on their own automobile coverage at age 18.
@MassDaD68 — I cannot believe the hassle you have encountered. I am wondering if the credit history my boys established having a card attached to my account is what allowed them to each receive a CC easily. $1000 limit for the college soph and $500 for the HS grad, but truly all they need.
@MassDaD68 - This surprises me too. That is the whole point of a secured credit card. My son did it with no income and no credit history through our credit union. I would try another credit card company or bank if I was you.
@doschicos - It’s about building credit and a dislike for debit cards. Credit cards have so much more protections built in.
I get the protections re: credit cards but with debit cards you also have protections from fraud and misuse. You won’t be left high and dry. To me, it is stepping stones. I think debit cards actual enforce living within one’s means which is a good skill to learn early.
I haven’t had to cosign any leases but my college grad isn’t living in a $10K per month place by any means either. Co-sharing an apartment and now a home. Had no issues with leases on their own in a major city. Is building up a nice credit rating just below 700 - only reason it is not higher is due to lack of time and lack of credit - only has one card and pays in full automatically each month.
All I’m suggesting is that there are other paths and no need to rush if you are running into road blocks obtaining a credit card. Folks survive without them fine and with good credit - both back in our day and now.
@doschicos we had to cosign the lease when DS was a student in both grad and undergrad school…and for DD who is now in school. Rent is bout $1000 a month…and has been pretty consistent overall with all the leases…three different metro areas.
My kids got the B of A credit cards back in the day 2003 and 2006. I have to say…one kid is still in school…and her credit line is higher than mine…which is ridiculous.
@thumper1 I haven’t had to sign leases in college as my kids’ schools offer a range of housing options including apts and group houses, but I’d have no issue personally signing a lease when they are getting their education. My philosophy is that I am there to support them at that time. I realize others might view it differently, however. Post-graduation, time to build independence but, like you, I would be there to assist with lease signing if needed for graduate school. My folks were there to help me get established and I pay it forward with my own two. Both are very level headed financially and are on good paths to saving and establishing good credit, and more importantly, good financial skills. The two don’t necessarily go hand and hand. Some of the tactics used and recommended for maximizing credit scores aren’t the wisest financial practices IMO.
I think the lease guaranteeing by parents depends more on the actual location. My kids were or are in expensive metro areas with expensive real estate.
We did not need to do anything with kid #1 once he was out of grad school in terms of consigning. But he now lives in a different real estate market.
After a number of rejections-- even for secured cards-- my D finally got an unsecured card from the bank where she has had her checking/savings account for the past 4 years.
@CT1417 It is cheaper to place them on their own coverage with whatever the state minimums are because they have no assets to protect. My liability coverages are much, much, higher for myself to cover my assets so having them covered under my policy ends up being more expensive due to the much higher caps. The difference in premiums is not huge but now my assets are not at risk through my adult children.
My kids haven’t had us co-sign anything with or for them since college. S graduated in 2010 and D in 2013. Both have not had problems getting CCards and paying them off in full each month as both hate paying fees and live below their means.
We never use debit cards. Many credit cards come with some kind of reward program. Of course the main rule with credit cards is to pay the balance at the end of the month. If kids are not mature enough to follow this rule they probably not ready to have a credit card.
The main reason I added my young adults to my CC when they started driving, was so they could get gas and in case of emergency. My D also buys groceries on a student CC she opened last year.
My D has to move off campus in senior year, although her credit score is quite good, and she will be 21, I might still have to cosign the lease because she doesn’t work full time, we will see.
But yes, for me the goal is that they can get an apartment lease or car loan once they graduate from college and earn a salary, without me having to cosign.
@doschicos “Is building up a nice credit rating just below 700 - only reason it is not higher is due to lack of time”
Exactly. Time! I wish to start the clock as early as practicable. My son will be commuting and it would be nice if he has funds to access quickly while on the road in case something happens or if he the need arises in a social setting.
The search continues.
When applying for a student credit card, check with them as to what you should enter for income. When ds applied for CC from citibank, for income they said to include the value of scholarship, grants or money paid for them for tuition as their income.
@Python20 I would agree with that. My son has gotten a few rejects where they cited lack of income. We only listed his summer job earnings of $4,000. I too am thinking that we should add into that the support we are paying for tuition and commuting expenses.
The scholarship and/or grant numbers are a bit strange to be honest. I honestly would treat those as a Purchase price adjustment to tuition more than anything else. If a kid gets a $25,000 merit scholarship which reduces tuition, should that be considered income for a CC application? Seems a bit strange. How could that possibly be used to satisfy the debt. To me the underwriters of these CC’s should view income and a source to pay back the CC debt. Using amounts to which the student does not have access (like a price reducing scholarship) does not seem to protect the banks risks.
Can’t hurt to try.
I just did a quick check with Discover, Citibank, and BoA on the CC applications. The detail listed for income does not mention grants or Scholarships. It also mentioned that if you were over 21, you could include amount paid for you on your behalf. This is not available to an 18 year old.
I will have him contact Citibank and see what they say.