As students begin to return to college or are already back into the routine of classes, some parents are still looking for ways to help their student out financially and this may come in the form of either a credit card or a debit card that is associated with a checking account. While this topic is nothing new to many parents, there are some considerations that may have been overlooked by the parents of the students and, as a result, the benefits and costs that are associated with these options need to be carefully weighed so that the best decision can be made in situations where parents of these students want their child to have access to cash for various expenses or if an emergency were to arise.
Despite the fact that there have been changes in credit card rules, students are still in a position to get a credit card, but a parent may have to cosign or the student will need to prove that they have the income that can be used to help them meet the costs that come with certain charges. Currently, many student credit cards are averaging rates of anywhere between 13% to 20%, but this may be higher depending on the situation of the borrower or if the student opts for a secured credit card, which will be backed by a savings account, these costs may vary as well since a student will have to put collateral down before the card is offered and also meet interest rate payments if they carry a balance.
While a credit card can be useful for an emergency, some students have gotten into a situation where they acquire more debt than they can handle, and while a parent may be on the hook for some of these charges or will be the cosigner for a credit card, this can still be problematic if a student allows interest rate charges to build while only making minimum payments on these charges. However, a student credit card has been used by some as a way to develop better financial habits as there are students who have used these cards to make certain purchases but who may have a part-time job on or off campus which could help them pay what they spend on their card.
However, some of these cards may come with an annual fee or could cause the overall cost that have to be met to rise thanks to interest rates, and this is where checking accounts that offer a debit card have been helpful in the past for some parents. As an example, there are some students who are able to get a free checking account and debit card, put money into the account either through savings or with the help of their parents, and manage their money throughout the semester with the use of this debit card so that they can meet certain costs that may go beyond traditional costs like tuition, fees, books, and food.
What parents are being advised to do by many financial professionals is to look at the financial habits of their child, look at the costs associated with both credit cards and debit cards, and then make a decision based on their personal decision as to what route may be best. Some students may be able to start building a good credit history with the use of a credit card, young students may not be responsible enough to handle a line of credit in a way that will keep the overall costs low when interest becomes a factor. What routes a parent takes will be a personal decision, but there are options beyond simple credit cards that may help students when it comes to having financing available for these costs that arise during the college semester.