Getting a credit card for your child who's still in college might not seem like the smartest idea out there by some parents who think their kids will most likely get into debt.

Before you demonize credit cards in general, look at the facts.

Your Credit History Is Vital

In the US, you need credit for nearly everything once you are an adult and dealing with the real world. Credit cards help people build a credit history, which is essential if you want to get mortgage, auto or business loans in the future. There are also several things that are impossible to do without having a credit card, and credit cards have many advantages over debit cards such as offering fraud protection, cash rebates, rewards, travel insurance and many more.

The new U.S. federal regulations aimed at keeping young Americans out of debt now ban banks from issuing cards to anyone under 21, unless the person has a co-signer or demonstrates independent means to pay bills. This means that almost all young adults under 21 will need an adult over 21 to co-sign for them.

Tip For Parents

John Olson, Financial Consultant at LPL Financial, has a tip for parents.

"If you are a parent, help your child build credit while still in high school. Assuming you have a good credit standing, ask your credit card vendor for one in their name (or both your names) with a small limit of about $500. Make small purchases that will be paid back to the credit card company well before the due date.

"Teach them how credit works and why the higher your credit score, the better off you will be in the long term."

Does this work?

John said, "Yes. I've done it with all three of my children when they were teens."

Would You Prefer Your Child To Get An Older Friend To Co-sign?

Parents who have kids in college should consider co-signing for their kid's first credit card. If you don't take responsibility for your kid in this matter and at least consider it, your child might go to a friend who is over 21 years old and ask him or her to be a co-signer instead.

Richard Hayman, President of Just Moulding, told that co-signing works as long as the credit record is not in the parent's Social Security number but rather their child's.

Richard said, "When I bought my daughter a car, rather than paying cash, I had her take out a loan with her Social Security number with me as co-signer.  We arranged for the payment to come directly out of her bank account. I deposited the payment monthly into her account. My info never showed up in her credit record.

"As the owner of a family business, I was lucky to have my daughter join us.  In order to build her credit (and reward points/miles) she charged a number of business items to her personal credit card and put in for reimbursement.  We did that for years and as a result, she never had trouble getting a car loan, credit card, or mortgage for her condo."

Parents Play An Important Role

Richard believes that parents play an important part in building their children's credit.

"It also helps to sometimes make monthly payments for a few months a year and pay a little bit of high interest to create a track record of making payments rather than paying the entire amount off each and every month.  It's also important to ask for larger limits from time to time," Richard added.

As you see, it's not a bad thing at all to co-sign for your child's student credit card. In fact, it's a smart thing to do.

Teach your child how to use a credit card properly, how it can affect his/her credit history, give him/her your personal tips and walk your kid through it personally - and chances are high your child will turn out into a financially responsible adult.

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