Credit cards are often essential for college students struggling to pay for food and lodging, in addition to huge tuition fees. However, a new law is going to make it harder for students to get credit cards, and many families are being forced to reevaluate their finances to provide for students in college. The New York Times posted a new article explaining the new law and how it will affect students across the country. You can find a section of the post below, or read the full text at NY Times.com.
Choosing what kind of plastic a college-bound student should carry may seem like an easy decision to make after all the work it takes to pick a school. But a new law making it harder for students to get their own credit cards means most parents now have to choose whether to help their kids get one, or send them off with less flexible choices like debit or prepaid cards.
The right choice could help a graduate enter the working world with a strong understanding of how credit works and a solid credit rating. The wrong choice could be costly, not only in terms of how much debt gets charged up, but also in the potential damage to the credit histories of both parents and student.
One part of the new credit card law says applicants under 21 must prove they can pay the bill, or have a co-signer to open an account. But most parents want their kids to have some card available, at least for emergencies.
That leaves parents to debate whether they should co-sign, or get their child a card linked to their own account? They might also ask if a debit card or prepaid card would be a better option.
The answers depend upon several factors, including the student's spending habits, whether they have any income, and the strength of the parent's own credit history.
''This whole situation with college students and credit is starting to turn into a thorny issue,'' said Bruce McClary of Clearpoint Credit Counseling Solutions. ''A parent really has to gauge their comfort level, in how they observe their child as someone who manages money responsibly.''