Parents of kids getting ready for college can breathe easy. They cannot get into credit card troubles easily. There is a new restriction by which anyone under 21 needs a co-signer to be eligible for an account unless applicants can prove they have their own means to cover payments. Parents can now call the shots about their teen's finances. Here are some options:
Credit cards for teens are for emergencies and to build a credit profile that is strong.
On the other hand any negative marks on the teen's account in case of a cosigner will also reflect on the account of the parent affecting both profiles simultaneously.
However as co-signer, there are few controls they can exercise. They can get statements every month and credit limit cannot be raised without their authorization. Teens cannot increase their spending without the parent's knowledge.
Earlier banks would just slap the account with a $35 fee every time a transaction was over the credit limit. Now cardholders will not be able to pay any charges at the register unless there is over the limit coverage enabled in the first place.
There is additionally good news for parents with American Express cards. If you have authorized your teen to use the card , then you can go online and lower or increase the spending limit on any additional card on the account.
If you feel playing with credit cards is not so much a good idea for your teen, then you could consider giving them a debit card. You have to co-sign on the card if your child is below 18 years of age.
Chase bank allows parents to set up email or text alerts in case of transactions going over a set limit happening on the card.
You can also opt to not have overdraft coverage if your child is not good at keeping track of the balance. The banks will charge a $35 fee no matter how small an amount is crossed on the limit.
Another popular option is prepaid cards. With many available from Master Card, Visa or even American Express they are a great idea for college goers. Users can review online transaction and balances if they have registered. However there may be additional fees that need to be researched before applying for one so you do not end up paying too much.
Additionally prepaid cards are not in the same league as debit or credit cards in case they get stolen. With the latter in case of a stolen card, liabilities are capped by law which is not the case for these.