It is undeniable that it can be difficult to obtain a first credit card as a young adult. However, this is an important step in becoming financially responsible. Fortunately, as a parent, there are several things you can do to help your child go through this delicate but necessary process of establishing a credit history.
Read on for tips to help you prepare your child for personal finance success and to start. build good credit.
If you want to see where they are on the credit scoring model, consider using a credit monitoring service. Credible can set you up with free service today.
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1. Teach them the basics first
Helping your child open their own credit card account involves more than helping them complete an application, according to Steve Adcock, founder of Think Save Retire, a resource for those hoping to retire early. For him, it’s about teaching them the fundamentals of personal finance such as paying bills on time and keeping track of their credit utilization ratio.
“Teach your child never to spend money on the card they don’t have in their bank account,” he advises. “Credit card interest rates are in debt if not managed carefully sometimes they won’t even check, so it is essential that they understand the importance of paying the cards in full each month.”
When they’re ready to open a new credit card, make sure they visit an online marketplace like Credible to compare credit card issuers, rates, fees and benefits offered by card type.
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2. Guide them through the research process
“Parents should do their best to help their children determine what type of credit card they need Says Adcock. In particular, he suggests looking at credit rating metrics to make sure they are likely to qualify for a credit card account, card fees, and any available card benefits.
While he points out that a rewards card can be beneficial, especially if you’re looking for cards that offer rewards in categories that young adults are likely to use like gas stations, food, and entertainment, it’s also important to weigh the cost of the annual fee. While no annual fee cards may not be the most rewarding credit cards, they ultimately come with one less. big bill that your child has to worry about managing on an annual basis.
Visit an online market like Credible to help your child find a rewards credit card that’s best for them.
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3. Look for secure cards or student cards
If your child has no previous experience with credit card worrying about travel cards versus cash back cards can be a step too far. If your child is a student, Adcock recommends looking at student credit cards. When it comes to unsecured cards, student credit cards usually come with decent card rates and low limits.
“In that case,” says Adcock, “a low credit limit is a good thing. This gives them an easy way to start building credit on their own without offering too many opportunities to get into debt. “
Check student credit card details on Credible website, where you can also see what other types of credit cards you qualify for today.
However, if your child is past the age for which a student credit card is appropriate, it may be a good idea to look for secure cards. The credit limit on a secure credit card is backed by a deposit made when the cardholder opens the account. If the card balance is not paid on time, the card issuer simply takes the amount owed from the deposit.
Most of the major credit card issuers offer secure credit cards, so you’ll have plenty of options. Head over to Credible to browse secure cards today.
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4. Consider co-signing for them
Finally, Adcock recommends considering co-signing the credit card application with your child. “It’s one of the easiest ways to help your child build credit while having a positive influence on their willingness – and ability – to repay their loans,” he says.
However, if you choose this route, it may be a good idea to have a conversation with your child about responsible credit card use and the personal finance expectations that come with it. Otherwise, you could stick to footing the bill for their expenses on an ongoing basis.
You can buy a new credit card from the Credible website. The site allows you to instantly get real rate comparisons from cash back cards, rewards cards, travel rewards cards and more.
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The bottom line
Nowadays, there are many types of credit cards on the market. There are cards for those with fair or bad credit, and cards for those with no credit history. If your goal is to help your child find the right credit card for them, patience is the key.
Be sure to look at a variety of cards before making your decision where to apply. Then, once you’ve submitted an application, wait for a response before applying for any other options. This will help you avoid putting too much pressure on your child’s credit report.
Also, be sure to help your child monitor their credit for any changes in their credit rating. A tool like Credible can help them check their credit and monitor identity theft.