The Benefits of Student Credit Cards

When my oldest son turned 19 last year, he was very surprised when I insisted that he apply for his first credit card – a student credit card with a low limit and no annual fee. He happily obliged!

Encouraging young adults to apply for credit may seem counterintuitive since it can cause a whole lot of problems if abused. However, credit cards can be a valuable financial tool if used responsibly:

• They can help build credit history: It will make it much easier for your son or daughter to apply for a mortgage or car loan down the road if they have an established track record.

• Credit cards can help teach young adults how to budget and use credit responsibly.

• Consumer protection: Depending on the card, it may offer extended warranty or security against loss theft or damage. Other cards offer travel accident insurance or rental car protection. Be sure to read the terms and conditions carefully.

• Reward points or cash back – if you’re going to spend on items such as groceries or gas anyway, you might as well be rewarded for it!

• Many cards now offer a few cents off fuel or discounts at various stores.
Building good credit from the beginning takes care. It’s important to follow a few rules to avoid the risk of a bad credit score:

• Pay on time – I recommend getting in the habit of setting a calendar reminder to pay a few days before the due date. Since your son or daughter is already (hopefully!) successfully tracking dates for term papers and exams, this shouldn’t be too difficult.

• Pay the full balance each month, otherwise an interest charge will be incurred.

• Try not to max out your credit limit; creeping too close to the limit will negatively affect your credit score.

• Don’t miss a payment!

So, if your adult child is mature enough to use credit responsibly, I encourage you to discuss with them the benefits and pitfalls of credit cards and how they work. It’s imperative that they understand that having a credit card does not mean they should spend more; they will just be spending more strategically.





Debbie Saleem is an Associate Financial Advisor with RGF Integrated Wealth Management. The views expressed are those of the author and not necessarily those of RGF Integrated Wealth Management, which makes no representations as to their completeness or accuracy.

©2018 RGF Integrated Wealth Management Ltd. | RGF Wealth Management Ltd., Member—Canadian Investor Protection Fund

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