<p>I’m glad my 18 yo D got a credit card in her own name before this takes effect. She has a $1000 credit limit through the bank she has her checking account and debit card with, and she pays it monthly from her account. I have taught my kids about credit and how to use it properly. I guess I will have to co-sign for the next one when his time comes to get a card.</p>
<p>My kids are named on one of our cards and carry those cards for emergencies or things we are willing to pay for. They have never used it for anything other than what we have specified and fortunately neither of them think a ‘want’ is an emergency. I do have a friend whose daughter royally abused the privilege of having the father’s credit card and it amazed me that he kept letting her keep the card. I like to think my kids do not abuse it because they are good, honest, sensible etc. They do also know us well enough to know the card would be canceled in an instant is they ever behaved the way my friends child did (‘needing’ 8 of the same skirt in different colors does not an emergency make!!).My son did occasionally use it, after asking us, for online purchases where a credit card was needed and sent us the $$ to pay for it. For some reason he did not get a credit card when he first started school though he has one now. My daughter got her own credit card in her own name the summer before her freshman year. She uses it and pays it off every month. At 22 My son has an excellent credit rating (in the 700s). Don’t know my daughters but I imagine it is pretty good as she has the card plus pays rent and utilities regularly. I know she did not have to pay a deposit on the utilities in her name because of her credit rating, while her room mate did have to pay a deposit for those in her name (not a bad credit rating - just a lack of one).</p>
<p>If student cards were not available and the only option was to be a cosigner I would be a little cautious (admittedly I am cautious by nature). The risk with being a cosigner rather than the card holder is that you don’t know what is going on, so if payments are not being made your own credit rating can get messed up before you are even aware there is a problem (when you are a cosigner anything that happens on that loan/credit card can affect *your *credit rating). My daughter actually did a consumer credit course and after she learned the ramifications of being a cosigner said she thought it was a very bad idea (yay for other people telling your kids stuff that just goes over their heads when you tell them!). We have drilled it into our kids about how important it is not to mess up their credit rating and it seems to have sunk in. Part nurture and part nature I think. </p>
<p>Really people would need to make a choice based on an honest assessment of what their individuals kids finance handling capabilities are. The friend mentioned above would be very foolish to cosign anything for her daughter as she is hopeless with money. I have another friend whose daughter refuses to have a credit card (her own or her parents) because she knows herself well enough to not be comfortable having one. Mom is having to insist she takes one for emergencies when she does study abroad next semester.</p>
<p>My three oldest daughters (ages 12, 15 and 16) have credit cards with their names on them, but they’re additional cards on our account. If I’m willing to give them access to my account, which has a very large limit, I’ll be willing to co-sign on their accounts, which will presumably have a much lower limit. I’ll keep an eye on them and pull the card if I think they’re not being responsible, but I think they will be since they’ll have a lot of experience using credit cards while under my roof. I didn’t have a credit card until I was in law school and needed one to charge plane tickets to go on callback interviews. It had a fairly low limit and I didn’t need a co-signer, even though I had no income. I guess they don’t do that anymore if they’re requiring co-signers</p>
<p>My 20 year old college student was quite put out to be notified that her credit limit was increased to $3,000 on her card. I guess it shows she is getting a good credit score but she doesn’t think she needs a $3k limit. Thank goodness she is sensible with her card. I do know at least one friend of hers who would probably immediately go on a spending spree with the increased limit.</p>
<p>Thanks for the news, yalemom2.</p>
<p>debit card DEBIT CARD. We are teaching DD credit card responsibility by giving her a debit card with a checking account that we transfer a “limited” amount every two weeks. She can spend her funds on anything from ordering take out chinese , to groceries, to new pair of jeans. This was she learn she can only spend a certain amont and must make choices. If she spenda it all right away she has nothing left when she might need a new pair of shoes. Then she learns to save , wait to spend, limit spending, examine prices of goods and services and a lot more. It’s a piece of plastic to her handles just like a credit card on line and at the store. DD has learned to look at her account online on a regular basis. That’s priceless.</p>
<p>IMHO the difference between a credit card and a debit card is that a credit card sends a bill which must be paid with a deadline. It’s probably the only bill a kid will be responsible for. Once something is paid for with a debit card, it’s over and done with. Both require that they budget, but young people should be taught how to know when a bill is due and pay it. There is nothing like having a trip to McDonald’s in March due in April to make them think about what they spend their money on.</p>
<p>RE debit cards - one other difference is that if you lose a debit card and someone uses it, the actual money is gone from your account. You should be able to get it back eventually by showing that it was used fraudulently, but in the meantime you’re out the cash. If you lose a credit card, you just let them know and you are not liable and you have not lost any money.
We learned this the hard way when DS lost a debit card and was out $600 for quite a while. Since then, he uses an ATM card and a credit card, both of which he has managed to lose more than once, but it isn’t a problem since the ATM card can’t be used without a PIN.</p>
<p>If the student is going to be traveling abroad while in college, it might be a good idea to have a co-signer, or someone who can be contacted in the US if there is a problem. When my DD studied in France one semester, I received a phone call from the credit card company stating that the card number had been used in Asia, and they wondered if hit was her. Obviously not, so they canceled the card. It would have been hard for the credit card company to contact her. I don’t know if a credit card company would allow a contact person that wasn’t a cosigner.</p>
<p>Both my s’s started their credit card history with gas station cards that I cosigned (ie it was my card but I requested additional cards in their name). They used it to gas up the car and get minor snacks, etc. Even though the primary card was in my name, they did get credit for it on their credit history. So did the Upromise card that I have, and got one in each s’s name when they went to college so they chould charge airline tickets home from school, book purchases, etc that I said I’d pay for in school.</p>
<p>Both also have had their own credit cards (not cosigned) since they were 18. They had work history with income, and Roth IRA accounts, showing savings, plus the good credit history with the gas station credit card and the upromise card. </p>
<p>Older s used a citicard that paid him a percent back on purchases. Younger s uses a USAA card (he got a second card but never uses it so I hold onto it for him). </p>
<p>Older s built up a nice credit history, between his cr cards and bills that were in his name when he lived off camus in college. When he went to buy a car at 22, he had a credit score in the high 700s.</p>
<p>
Unfortunately they changed the rules so being an authorized user on someone elses card no longer works towards the credit rating.</p>
<p>^^^^ oooh, thats a bummer, swimcatsmom. When did they change that rule?</p>
<p>Here’s a brief overview of the impact of the new regulations, from the bankrate website [8</a> major benefits of new credit card law](<a href=“http://www.bankrate.com/finance/credit-cards/8-major-benefits-of-new-credit-card-law-1.aspx]8”>Credit CARD Act Of 2009: What Is It And How Does It Affect You? | Bankrate)</p>
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<p>I’m not sure exactly when but I think it was a couple of years ago. We have our kids as authorized users on a card mostly for convenience and emergencies. But we also had heard (Suze Ormon I think) a while back that doing that would help their credit rating. The first time we had an inkling that that would change was when my son got a personal loan at the bank and they told him that the part of his record relating to our card was ‘false credit’ or something like that. When he told us that I started checking on the web and sure enough they were changing the rules so that being an authorized user was no longer counted in your score.</p>
<p>Another option to consider is a secured credit card. I know credit unions offer them. What happens is that you place say $500 in an account which allows them to have a credit card with a $500 limit. After 6 months it should give them a credit history so they can get a regular credit card.</p>
<p>When S1 was 16, he got his own checking account. Instead of giving him money, I gave him a check monthly that was the equivalent of money I gave him otherwise (gas, lunch, school fees, etc.). He was responsible for managing it and did very well with it. He also had a debit card with that account. When he started college, I added his name to one of our cards for books, clothes, things we agreed to pay for. Before graduating college, he got another card in his own name for a company he worked for. He still has both. Since ours has a much higher credit limit, I told him to keep it in the event of a serious emergency. </p>
<p>S2 went across company to a band camp when he was 16. I had his name put on another of our cards at that time because I wanted him to be equipped for any unforeseen emergency. He didn’t get his own checking account until he was ready to leave for college (with debit card). He knows what accounts are to be used for what expenses and so far has been quite responsible. Sometime before he graduates we will get him a card in his own name. </p>
<p>If you have responsible kids, I think it is a great way to build fiscal responsibility. They both know that the bills come to me and I pay them. So they can’t hide purchases. And I do ask for explanations for unusual charges.</p>
<p>I’m turning 18 soon and was hoping to get a credit card. I’ve held the same job since I was 14. I wanted a card because I never have enough cash on me to pay for food or gas etc. I also wanted to get reward points for my insurance I pay out of my own money, car repairs, concert tickets, or whatever else I spend a lot of money on. My mom won’t let me have a debit card… even though I have over $5,000 saved in my bank account. She won’t co-sign with me for a credit card either. I was planning on getting a new bank account with whatever college I go to next year (fall 2010). So I guess I’m stuck getting a debit card through that?</p>
<p>Right now I have my mom’s credit card with my name as an additional card holder. I use it to get gas (and she transfers the money out my bank account) or when she tells to pick us up something to eat on my way home from work.</p>
<p>Here is some information that may help. There is no way to know exactly how all the new changes will affect credit history. Keep in mind there are 4 ways to help establish credit with a credit card.</p>
<p>Individual Credit – a credit card in the student’s own name based on their own income, etc. They are solely responsible for the debt and the credit history that evolves.
Joint Credit – A card applied for in the student’s name and someone else’s. Both applicants income and credit history can be taken into when granting credit. Both are responsible for all charges on the account.
Authorized User – (Also known as piggybacking) Only the main applicant’s information is taken into account for granting credit and only that person is responsible for payment. The student does get the benefit of the parent’s credit info on this account. If this is used, it is suggested that the oldest credit card with the lowest balanced is used for maximum impact.
Secured Credit Card – Money is placed in a savings account or other secured account and a low limit credit card is issued in the student’s name. The savings account cannot be accessed as long as the credit card remains. These can have some steep fees associated with them so look at them carefully but if you don’t want to be liable for your student’s fiscal irresponsibility or if you have poor credit yourself, this may be the way to go. </p>
<p>Fair Isaac who created the FICO score announced it would do away with the use of authorized users to boost credit scores in 2007. This was due to the abuse of selling good credit scores of some people to people with poor credit. After outcry by both consumers and the credit bureaus, they announced in later 2008 that they would not do away with this practice completely. Although they have not announced exactly how they now use authorized users, it is widely suggested that direct relatives (parents, spouses, kids and their spouses, etc) and same household members will still get benefit of this. Strangers or distant relatives will not. </p>
<p>The Credit Card Accountability, Responsibility and Disclosure Act prohibits credit-card issuers from extending credit to a person under 21 unless one of two conditions is met.</p>
<p>Under one condition, the card issuer has to verify that a young adult has the independent financial means to repay any credit that has been extended. One would think this would have always been the case. And yet, we know that lenders - counting on a parent or some other responsible adult to bail out a young person - have granted credit to underage consumers living off student loans or meager income.</p>
<p>Under a second condition, a young adult could get a credit card if a parent, legal guardian or an individual 21 or older agrees to sign a credit application as a co-signer.</p>
<p>From [Michelle</a> Singletary: Protect child from credit-card trap](<a href=“http://readingeagle.com/article.aspx?id=141612]Michelle”>http://readingeagle.com/article.aspx?id=141612) 6/4/2009</p>
<p>So, that means that if your child has their own income, they could still be issued a credit card between the ages of 18-21. Chances are it will be a low level card to match what is probably part-time income. What banks and credit unions will count as income is the question. Banks may choose to be very liberal about this to still get the student accounts. They could do this to seem to comply with the new law. Student loans probably not and money from parents/grandparents probably not. But trust fund disbursements and scholarship money or fellowship money maybe. When my daughter applied for a credit card as a college student, she got a higher credit limit by using scholarship money above tuition amounts as income. She was at the bank talking with the banking officer and the person taking the application for the bank on the phone and asked them if she could count that as income. They both said yes – classified as other income. Your Mileage May Vary.</p>
<p>From this article dated 6/24/2008. Piggybacking (Authorized User) information has changed since then.
[Adulthood</a>, legal rights and credit cards: Turning 18 with a credit card](<a href=“http://www.creditcards.com/credit-card-news/turning-18-credit-card-1279.php]Adulthood”>http://www.creditcards.com/credit-card-news/turning-18-credit-card-1279.php)</p>
<p>Here’s how the new adult credit card game is played – for both parents and for young adults.</p>
<p>Authorized users
When children are authorized users on a parent’s credit card, nothing changes with an 18th birthday: Parents remain solely liable for any debt incurred. “A credit card company doesn’t take into account the income of an authorized user on a credit card application when issuing the card, so the applicant is liable, but not any authorized users,” says Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling.</p>
<p>So parents, regardless of whether your children are adults, as authorized users the liability runs one way: You are on the hook for anything they charge, but they are not on the hook for anything, whether you charge it or they charge it.</p>
<p>Jointly held cards
If you and your over-18-year-old child apply for a credit card as joint users, you are both liable for any debts racked up on that card. So, if your kid goes to town and charges thousands of dollars for an Xbox 360, video games and an iPod Touch and can’t pay, you are on the hook. In a similar fashion, if you rack up the debt and can’t pay, the credit card company can go after your child for the entire debt.</p>
<p>Individually held cards
You aren’t legally liable for any debts that your adult children incur on their own, even if they are college students without much, if any, income. </p>
<p>Just as you aren’t legally liable for your adult child’s debt, your child has no liability for any debts you incur on your card.</p>
<p>Piggybacking lives – for a while
Parents can give their children a leg up on creating good credit histories by including them as authorized users on their credit cards. The practice, called piggybacking, gives authorized users – children – a better credit score because a good payment record by parents shows up on the children’s credit report</p>
<p>An update on piggybacking from the same website. It also tells you the best way and the best time to take the authorized user off, etc. </p>
<p>[Authorized</a> user piggybacking: When should the credit ride end?](<a href=“http://www.creditcards.com/credit-card-news/authorized-user-when-stop-piggybacking-1270.php]Authorized”>http://www.creditcards.com/credit-card-news/authorized-user-when-stop-piggybacking-1270.php)</p>
<p>And finally, an article from Dec 2008 on the new FICO scoring method and how credit history is being impacted that can be a benefit to all of us, not just students.</p>
<p>[New</a> threats to credit scores - MSN Money](<a href=“http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/new-risks-to-credit-scores.aspx]New”>http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/new-risks-to-credit-scores.aspx)</p>
<p>[Defend</a> Your Dollars: Q&A- The Credit Card Legislation](<a href=“http://www.defendyourdollars.org/2009/06/qa_the_credit_card_legislation.html]Defend”>http://www.defendyourdollars.org/2009/06/qa_the_credit_card_legislation.html) This is Consumer Union site.</p>
<p>CU Response: It is CU’s position that everyone should be underwritten when it comes to credit. That being said as this next college summer and fall semesters start will be the last open season on college campuses for credit card companies so BEWARE. After February, if you are 21 and over when the law goes into effect DON’T co-sign for your friends.
This provision is not retroactive. If you are under 21 and currently have a credit card you will not be subject to the new provision with respect to your current card. If you apply for a new card, you will have to show income and/or obtain a cosigner.</p>
<p>So, for those who will be attending college in the fall, you may still be able to find those credit applications around campus. And, the marketing will be heavy telling you that this is your last chance. </p>
<p>Even if you get a credit card on you own income after February, these following provisions of the new law may limit what you can get</p>
<p>Limits the credit line from any one credit card to the greater of
20 percent of annual income or $500, unless there is a co-signer;</p>
<p>Limits the total credit line from all credit card sources to 30
percent of annual income, unless there is a co-signer;</p>
<p>So, parents, as you evaluate whether or not to help your student get a card now or later, take these things into consideration. No legal changes should rush you into helping a financially irresponsible child get a credit card. On the other hand, if your child has been responsible and you think a credit card could benefit them because they may be going overseas, etc before 21, then now may be the time. Cards are still being issued to students on the old, no income, no cosigner basis.</p>