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Card Strategy for a parent of a to be College Student

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I am asking this because the answers may be relevant to others.  My son has turned 18 and will enter college this Fall, and has a low paying summer internship (less than $1500 per month). He has been an authorized user on several of my cards for over an year and probably has a credit record now.

It would probably be in his interest to get a Chase Freedom card now (and possibly others before the  Chase limits are hit), and while he is employed (his job ends soon, and he is not planning to work during the term) and is not yet a student (although accepted for this Fall).

Questions include 1, Is he likely to be approved with a income in his own name that is low?
 If am willing to cosign or make it a joint application  is he likely to get approved on this basis even if I fail the Chase 5 cards in 24 months test (which I do).

There could be advantages in having another Chase Freedom in the family with 5% back on certain categories.

A similar question might apply for a Discover it, where another one in the family might earn 5% back (doubled for first year), which could be useful.

Are there any other ingenious ideas to take advantage of the credit potential of a child just turned 18?

I could even imagine strategies where he signs the applications, makes the parents authorized users, but the parents hold the cards and make sure they are paid on time (possibly with him doing most of his spending as an authorized user on a high cash back card held by a parent.) This would be most applicable where the parents are supporting him in school and one wishes to optimize the family finances, while leaving him with a good portfolio of cards and a good credit rating on graduation). A son in college would not hit the maximums on many categories for 5%, or take full advantage of interest free periods on purchases or balance transfers, but his family could.




 

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Which bank or banks would you do that for?

ProfessorEd (Aug. 04, 2017 @ 6:54p) |

Technically you are right.
 However, if one worries abut that the card could be sent to the house, and opened and put awa... (more)

ProfessorEd (Aug. 04, 2017 @ 6:56p) |

It depends on which one you believe has the most attractive credit cards. Since I believe the Freedom Unlimited is a goo... (more)

ryeny3 (Aug. 05, 2017 @ 9:04a) |

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If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

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Glitch99 said:   
If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

  Please explain.

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ProfessorEd said:   
Glitch99 said:   
If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

  Please explain.

  You are cosigning your credit away on a person who has not had their own 'life experience yet'.
That can mean, they will rise to new heights and not affect your credit at all OR

They can drag themselves down to a 520 score and take your score with them because you 'cosigned' for their misdeeds.

I am not saying to 'help' your child out as they grow, but a CoSign is a path to ruin.
The closest reason I can think of that you need to cosign is so they can get a place to live, but if they have roommates you just cosigned for the good behavior of the roommates as well.

You might want to read my post of roommates and 'captain commando' and 'food stealer' and 'room browser'.

 

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ProfessorEd said:   
Glitch99 said:   
If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

  Please explain.

  There is absolutely no reason to cosign or have a joint credit card. 

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ProfessorEd said:   
Glitch99 said:   
If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

  Please explain.

  
Adding him as AU's is plenty of a boost. Let him get a card on his own profile, it will be low limit (<$3k) but that's probably a good thing. He can request increases after a year or so. If Chase rejects him, Capital One has a history of college student cards. Just make sure balances are not carried. Add his account to your yodlee/mint to track it.

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Do credit card companies still offer signups at college campuses? When I was in college, I had several credit cards in my own name and a part-time job but my card application was still rejected not once but twice by JCPenney.

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qcumber98 said:   .....but my card application was still rejected not once but twice by JCPenney
  Karma, no wonder JCP is going to bankrupt soon. 

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If you have any real concerns, I would as his Dad,
generate your Discover referral.
Have him apply using your referral code for the $50.00 cashback bonus for each of you.
Have him apply for his own Discover It. If turned back, he can recon for either a student version or worse case secured version which is automatically reviewed for upgrade later.

IMO, do not game his card, teach him to use it responsibly and insure he does. It should be part of his leaving the nest character building.

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My apologies for the juvenile nature of my post. This thread triggered my topic alert for 'discover'. The topic alert email includes the thread title and body of the post, but it does, in fact, not include the author's name. As I read the verbose hyotheticals, I was willing to assume the author was likely to be ProfessorEd on this basis (which it is).

On a more serious note, I agree with the others that are saying this is generally a bad idea. He's only 18. I would teach him all about credit and how to use I wisely (in the general sense) and then how doing so can allow him to take advantage of his good credit. He'll likely have many friends in college that talk about how much debt they or their parents are in. You can (and probably have) shown him how to use debt to your advantage to make money, and take awesome free trips on the bank's tab.

Just want to specify again that the first part of my post was in jest. I appreciate your posts ProfessorEd!

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qcumber98 said:   Do credit card companies still offer signups at college campuses? When I was in college, I had several credit cards in my own name and a part-time job but my card application was still rejected not once but twice by JCPenney.

No. That practice was banned (in the CARD Act IIRC).

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Chase is actually hard to get for beginners with no payment history of their own, AU or not. I wouldn't bother trying for it.

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billybwilde said:   
ProfessorEd said:   
Glitch99 said:   
If am willing to cosign or make it a joint application
You can drop that line of thinking entirely.

  Please explain.

  
Adding him as AU's is plenty of a boost. Let him get a card on his own profile, it will be low limit (<$3k) but that's probably a good thing. He can request increases after a year or so. If Chase rejects him, Capital One has a history of college student cards. Just make sure balances are not carried. Add his account to your yodlee/mint to track it.

  Good advice by Billybwilde.  Now, consider this corollary:  Have him obtain a card in his own name BUT you, the parent, use it exclusively for six months and paying it off each month. You can use the card at gas stations and supermarkets where the cashier does not verify card ownership.  Give him the card after six months and follow Billybwilde's advice.

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I assume that the credit card desired/needed is supposed to be just a "spender" (to be paid fully each month) as opposed to providing real credit (creating debt).  With that in mind, my personal views are:

+  Don't worry about son's credit score, etc. at this point in life (*), EXCEPT as it relates to next point.
+  WORRY about son using card for excessive spending and getting into debt, esp. where there's not full transparency (your access to statements, etc.).
+  LIMIT your/his risk by using prepaid cards, either single use or reloadable, at least until you are satisfied as to track record.
+  If & as appropriate, maybe "graduate" to a stand-alone (sole responsibility) credit card in his name.
+  If you are worried about emergencies, there are plenty of ways to backstop/supplement the above approach:  AU cards on your account, with spending limit; your remote reloading of a reloadable prepaid, etc.

P.S>  Seems ridiculous to worry about maximizing bonuses, rewards, etc.  Bigger fish to fry here.

(*)  My experience:  Banks & other lenders will provide plenty of "opportunities" to open cards, borrow money, etc. as time goes by, which will build credit history.  Over the long term, the important thing is how you manage credit that is made available to you.

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Gas card. They'll approve him with a $150 limit to start.

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My children had credit cards with reasonable credit limits in high school. For college, we deposited a fixed amount in a bank account from which the credit card and some personal expenses were paid. Although we didn't have problems with overuse, I downloaded their transactions into Quicken as I do my wife's and mine. As long as their grades were in line with what we expected from them and there were no behavioral problems, we didn't obsess over how the money we provided was spent.

Our children had summer jobs and used their own money for things that I might have felt were foolish. If there had ever been a purchase or purchases that exceeded our agreement, we could have asked that child to transfer money from the account where their summer earnings were deposited into the college expense account. 

My children are competitive athletes. We got them credit cards earlier than we might otherwise have done because we didn't want them carrying large amounts of cash when traveling without us. One of my children had items taken from a bag kept in the team area while competing internationally. Although I believe the goal may have been to get gear with the team logo on it and not cash and credit cards, the lack of cash in the bag may have discouraged someone from taking a wallet from that bag. Although some of you have criticized my purchase of insurance for a college student, that one equipment bag was worth more than the cost of many years of insurance.

Depending on the student, the risk of abusing alcohol and other things is probably higher than the risk of abusing a small credit limit. If others haven't convinced you to avoid getting your child a credit card prior to beginning college, my recommendation would be a Chase Freedom Unlimited card, if approved, or a 2% cash back card. For emergencies and expensive textbooks, making your child an authorized user of one of your cards may be appropriate as well.

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My niece is a scholarship athlete as well. The college will reimburse some of her expenses. She has a Freedom card for csahflow reasons including emergencies. My sister monitors the Freedom account since the niece is her daughter.

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It sounds like people are having no problems getting Chase Freedom cards for people around age 18 with no income. Is that right? I would have thought that Chase required some income but if niece is scholarship athlete the NCAA rules dictate no income allowed. My niece just turned 18 and is starting college next month so wondering what best choice is for her. She's not an athlete but will not be working so she has very small income from part time job for part of this year only. 

I was thinking she would have to get one of those credit cards that require bank balance of the same amount as credit limit fora starter card but sounds like others are having success getting a real card.  I had read in the past that cash back cards usually required decent credit scores so were not easy to get for 18 year old at college.

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I never needed my parents' credit card in college (2001-2005) or any other credit card for that matter. I had a debit card for my bank account and never carried around much cash. Besides the ubiquitousness of points and cashback these days compared to 15 years ago, why does a college kid need a credit card? By the time I bought a house (2009), my credit was over 750. Is there any reason they need a 750+ credit score by the time they are 22?

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I went into a Chase branch and discussed ways to get a Freedom card for a student with minimal income. One issue was our children were authorized users on at least one of our cards which caused them to have credit that was a large multiple of their income. We agreed to cancel those accounts and offered to open and fund a Chase bank account. Since this is FW, it is worth mentioning there was a bonus for both the credit card and the new checking account.

Although there are NCAA rules that restrict earning money as a professional athlete from your sport, those rules don't prohibit most other forms of employment. I only mentioned athletics in my earlier post because the need for a credit card while traveling without parents motivated us to get or children earlier than many at FW would consider prudent.

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meade18 said:   ...why does a college kid need a credit card? ...
 

  I like it for the arms length of the transactions.  My son had a mixup with Amazon where they didn't show he had returned textbooks, and they charged him erroneously for the full price - by withdrawing money out of his account because it was a debit card. If he had used a credit card it would have just been a charge that could be disputed without him having his account almost drained.  (it got resolved btw).

Just recently he got a solicitation for a fidelity card (we have accounts there) - he applied using his summer job info and got approved.

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Got my first credit card on campus. Discover and Bank of America are normally there to advertise to college student and they are easier to approve on the first credit card. It wasn't the best card but at least good to build up credit.

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theverve said:   
meade18 said:   ...why does a college kid need a credit card? ...
  I like it for the arms length of the transactions.  My son had a mixup with Amazon where they didn't show he had returned textbooks, and they charged him erroneously for the full price - by withdrawing money out of his account because it was a debit card. If he had used a credit card it would have just been a charge that could be disputed without him having his account almost drained.  (it got resolved btw).

Just recently he got a solicitation for a fidelity card (we have accounts there) - he applied using his summer job info and got approved.

  Big +1.  Debit card protections are vastly inferior to those provide to credit cards.  

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I haven't applied at Cha$e in years, but don't they ask for household income, not personal? Many cards do... I'd help him sign up for two cards with two separate issuers to get him started -- using household income. Then he's on his own.

I TOTALLY echo others on saying no to the joint app / co-sign.

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tuphat said:   
theverve said:   
meade18 said:   ...why does a college kid need a credit card? ...
  I like it for the arms length of the transactions.  My son had a mixup with Amazon where they didn't show he had returned textbooks, and they charged him erroneously for the full price - by withdrawing money out of his account because it was a debit card. If he had used a credit card it would have just been a charge that could be disputed without him having his account almost drained.  (it got resolved btw).

Just recently he got a solicitation for a fidelity card (we have accounts there) - he applied using his summer job info and got approved.

  Big +1.  Debit card protections are vastly inferior to those provide to credit cards.  


Vastly? Considering how rarely people actually use the protections that credit cards offer, it's not that big of a deal. I've done maybe 4 chargebacks in 10+ years, no theft claims, no extended warranty claims, and no price protection claims. I've had less than a dozen fraudulent charges on credit cards and a debit cards (even though I only used the debit cards at ATMs) and the banks have always made it right. I think for 4 years, a college student with no income is fine with a debit card. Aside from the rare instance of a super large erroneous charge, as long as he's keeping $500+ in his checking account, a debit card will be enough.

With that said, whatever age a kid understands that a credit card isn't free money and they aren't going to use it to go into debt (18 for some people, never for others), getting a credit card, especially one with points/cash back, is a good idea. You and I and nearly everyone on FWF take it for granted that when we use a credit card, the exact same thing is happening as when we pay with cash or when we pay with a debit card because we pay our credit card bills in full and never incur a fee or interest. You can't assume an 18 yr old is going to understand it the same way. I know I didn't quite get it at first and thankfully didn't use it like some people do.

There are plenty of cards out there just for students, so just go with one of those. Capital One was my first card. I think I got a free T-Shirt when I signed up for it on campus.

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^^ You must not have the Fidelity card. Get one of those and you will get plenty of fraud!

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If your child gets a credit card the parent can hold it, and as an authorized user benefit from the points etc. The parent can make sure it is paid, and helps build his credit.

An advantage of a credit card where the parent has access to the records is that you can see how money is being spent, which may be better than just giving him money as cash or for a bank accounts only he has access to (the only option my father had years ago), or relying on his word as to how much he needs to live on. While there is a risk of a child resenting being questioned, I can also see knowng where he is spending money could lead to intereting discusssions. What did you think of the movie, or who did you take, or how did yoiu come to go to Ocean City for the weekend. To me, this sounds less intrusive than leading with "who are you dating" type questions?

I could see a system where he did most spending as an authorized user on my BOA Platinum Honor's card (2.625% back), and the family did spending on a Chase Freedom and or a Discover It (with points match for the first year, that is 10% back on certain categories such as Amazon, where we are heavy spenders).

Thinking long term, if he chooses to view credit cards as a source of profit he will want several Chase cards, and could come up against their 5 in 24 months limit.The student cards are not very valuable for rewards, but could block the more lucrative  cards later. Hence consideration to co-signing (even if he never had possession of the card) to add to the families portfolio of cards.

I am aware of the risks of them having use of cards, but he is responsible plus since I will be paying all of the bills (essentially) for the next few years I have considerable leverage (and he cannot use a card he does not even have in his possession).

One reason for raising this topic is that it may be wise to make children authorized users early, even if you keep the card in your possession most of the time just to build their credit record.

Of course, I agree tht first priority is being sure they understand that credit cards are real money, and spending must be controlled.

One reason for thinking he might want to apply now is that he legitimately can state he has an income (not large), and is not now a student. I am not sure whether this will get him a decent card (which is why I was asking advice here)

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@meade18, re: debit vs. credit card protections --

Start with a basic fact:  A fraudulent/unauthorized transaction on a credit card has no real/immediate impact on your financial situation (horse still in barn).  Contrast with same situation on a debit card, where someone has/can empty your bank account without your even knowing (horse has left barn, now probably getting bottle service in an Eastern European strip joint).

For credit cards, your worst-case downside risk is $50. For debit cards, the worse-case risk* is ALL THE MONEY TAKEN from account, AND POSSIBLY MORE, if you have linked accounts, overdraft protection, etc.

* Reporting lost/stolen >60 days after statement. If you report btwn 2 days and 60 days after stmt, risk is $500.

Yes, both Visa and MC have "Zero Liability" guarantees, but read the fine print. Broadly, it only applies to signature-based transactions, with little protection for PIN-based transactions and none for ATM transactions.

I'm glad that you have had positive experience re: debit cards, but personally I'm not willing to take the risk, when there's a demonstrably better
product (credit).

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ProfessorEd said:   ...and he cannot use a card he does not even have in his possession

ROFLMAO
  

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tuphat said:   
ProfessorEd said:   ...and he cannot use a card he does not even have in his possession

ROFLMAO
  

  If he has a good memory (he's going to college so I assume), then he can order lots of things online without the physical card.

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tuphat said:   @meade18, re: debit vs. credit card protections --

Start with a basic fact:  A fraudulent/unauthorized transaction on a credit card has no real/immediate impact on your financial situation (horse still in barn).  Contrast with same situation on a debit card, where someone has/can empty your bank account without your even knowing (horse has left barn, now probably getting bottle service in an Eastern European strip joint).

For credit cards, your worst-case downside risk is $50. For debit cards, the worse-case risk* is ALL THE MONEY TAKEN from account, AND POSSIBLY MORE, if you have linked accounts, overdraft protection, etc.

* Reporting lost/stolen >60 days after statement. If you report btwn 2 days and 60 days after stmt, risk is $500.

Yes, both Visa and MC have "Zero Liability" guarantees, but read the fine print. Broadly, it only applies to signature-based transactions, with little protection for PIN-based transactions and none for ATM transactions.

I'm glad that you have had positive experience re: debit cards, but personally I'm not willing to take the risk, when there's a demonstrably better
product (credit).

  
I totally agree on the protections. I NEVER use a debit card. I only use credit cards. But you and I understand them. We know it's not free money. Many people, especially 18 years olds, don't. 

If I had an 18 year old going off to college, I would be more concerned about protecting him from himself than protecting him from fraud. I think an 18 year old maxing out his credit card to the tune of a few thousand dollars would be more likely (and probably more detrimental over the long run) than a debit card being stolen and losing a few hundred until the bank refunds the money. We agree on the risk of using a debit card instead of a credit card and we practice what we preach. We simply disagree on how much we are willing to trust an 18 year old with a credit card. I would need to be VERY confident that they aren't going to be reckless (i.e. at least a year of managing their own finances) before I would encourage my kid to get a credit card.

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Alternatively, go into the branch with your child and have him open a checking account and apply for a credit card with $500 limit. Between the checking account and credit card bonuses, you family could receive more than the $500 credit limit in value.

If you are concerned about your child being responsible, you should probably worry more about him skipping class, not studying, and failing to take advantage of an educational opportunity that may cost orders of magnitude more than the $500 credit limit.

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Which bank or banks would you do that for?

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Technically you are right.
 However, if one worries abut that the card could be sent to the house, and opened and put away (with his permission of curse).

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ProfessorEd said:   Which bank or banks would you do that for?
  It depends on which one you believe has the most attractive credit cards. Since I believe the Freedom Unlimited is a good choice, I would try Chase

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