With millions of young Americans heading off to college in just a few weeks' time, credit experts are advising parents to keep a close watch on their credit card spending. Recently conducted studies reveal that on average, college students owe some $4,100 in card debts to different credit card companies. Similar surveys have also found that students who graduated from public colleges and universities in 2008 acquired $17,700 each in debts. Worse, college students who graduated from private academic institutions have, on average, $22,375 in credit card debts.
The figures have alarmed financial experts to the point that some have even called on parents to avoid giving their college-bound children credit cards. A new that will be enacted early next year will also prohibit consumers below the age of 21 from acquiring credit cards unless they provide proof of substantial income or if someone agrees to co-sign for their application. However, some analysts call the provision counterproductive and unfavorable for young consumers who need good credit scores to get better financial options. They point out that credit is essential even for college freshmen for them to start building up good credit ratings and histories.
Financial analysts also explain that college students need to be aware of the ins and outs of the credit industry. Credit card companies are known for controversial practices that often earn the ire of consumer advocacy groups. Knowing how to avoid pitfalls and potential traps is crucial for younger cardholders to safeguard their credit scores and ratings. Having high ratings will ensure consumers of better deals and financial options in the future.
For college-bound Americans, the best option would be a low-limit credit card. Parents can get their students cards with relative low limits for emergency use. Cardholders should also limit their purchases with cards to gas and other essential items. However, college freshmen must remember to avoid high debt-to-limit rations on their cards so their credit scores and ratings would not suffer negatively.
Parents must also ensure that their children are using the cards for useful means, and not for lavish purchases. They should ask card companies to forward card statements directly to their homes so they scrutinize and analyze their college freshmen' spending. Parents can also keep a close watch on their child's expenditures through the internet. Cardholders must also be taught wise fiscal management to prepare them for the real world and the reality that is the credit industry.