Practical Dad

Does the HS Student Get A Starter Credit Card?

As Eldest is looking towards senior year in high school, I've reflected on some of the personal finance items that I've seen other parents do with their kids.  Senior year is a good time to do things like open a checking account, but should I also go ahead and help her obtain a credit card (with my wife and I as cosigners)?

I ask because multiple other parents have looked askance at the easy credit available to the lovably gullible/financially stupid college students and decided that they'd help the prospective college students obtain a credit card via co-signing.  The thought process is that if the kids have experience with the possession of plastic, then they'll be less likely to go apeshit when they get one.  The other aspect is that they want to help the child begin to earn a solid credit rating; spend a small amount - $20 or $30 - and then pay it off by the due date.  The child learns to think in terms of due dates and becomes used to the concept of disciplined spending.

The arguments for it are persuasive.  When I was in college three decades ago (?!?!), it was rare to be able to obtain a credit card.  It might be possible if you had a cosigner or were a senior with a solid lock on a job, but it was generally less available.  By the credit crunch of 2008, the cards were available to college freshmen and it became common for college graduates to leave with both student loans and several thousand dollars in revolving credit debt.  Certain lenders preyed - and I use the word purposefully - upon the financial innocence and naivete of youngsters with seemingly free cash.  There are some improvements with the Dodd-Frank Act, such as a statement specifying the timeframe and amount ultimately paid if only the minimum due is paid, but the burden of that debt continues with the youngsters.

My thought is this, though.  In the new economic model that is approaching - generalized austerity and lower living standards - it's better for them to learn to live without the panacea of easy credit.  I've been preaching debt control and savings for years.  The older two have heard - are hearing - the need to leave college with as little debt as possible and I've been explicit that that carries over to the consumer debt as well.  I want them to learn to do without or learn to improvise some other means if they need something, and just giving them a credit card now isn't liable to instill that.  Hell, giving out a cell phone hasn't led to learning to control the texting, has it? 

The question isn't settled and at some point in the near future, I'll raise it with my wife and we'll work it through one way or another.  But until then, there will be no cards.

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