Credit Cards or Cash: What Is Best for a Student-Kid?
07/22/2008 | Understanding Credit Cards
When your child finishes high school, he or she enters college. And in most cases the college is not within 5 minutes walk from home. Pretty often kids need to leave not just their home places, but they need to move to another city or even state to attend college.
Most parents give financial support to their children during at least the first year of studies. But the question is: what is better - cash or a credit card? This issue, actually, is pretty complicated. So, let's try to figure out, what is the best way to provide your young and inexperienced kid with necessary financial basis.
Let's analyze the "cash support" first.
Cash is one of the credit card alternatives. Having cash on hand is convenient for an 18-year-old kid. With cash in their pocket, your child will have no problems associated with managing a credit card. They will not have to thoroughly look through tens of credit card offers, carefully study credit card features, terms and conditions, read the fine print and only then apply for the best credit card that fits their demands and lifestyle.
I guess, you would not deny that your teenage kid is not really good at financial management and he or she would hardly bother to make a deliberate decision, when choosing a credit card. And if your child will be a careless and unreasonable credit card holder (which is more likely to happen due to their young age and lack of experience), they will end up being a bad debtor.
On the other hand, imagine yourself being a teen with cash in your pocket. Wouldn't you just blue it for parties, CDs, movies and other stuff? I would. So, if you choose the "cash support" version, you should better send equal limited amounts of cash every month.
Now, let's see the pros and cons of a credit card for your kid.
Using cash is simple. But it will not teach your kid financial discipline. Using a credit card makes your child's life a bit harder. Credit cards teach people, especially young people, to be responsible. As a rightful owner of a plastic, your son or daughter will have to take care of the monthly payments, think about interest and fees.
However, most probably, your teenage child does not have any credit history yet, so, he or she will have not so many options in terms of choosing an appropriate credit card for them. Student credit cards, secured credit cards or bad/no credit cards are what credit card industry is ready to offer to your youngster.
The terms of the above-mentioned credit cards are not that favorable. And it will be not an easy task for your inexperienced in managing finances kid to do everything right and avoid credit card debts.
There is another option for your offspring to have steady money support. You can make your child an authorized user of your credit card. Your kid will get a separate plastic on his or her name and a chance to spend your credit card funds. But mind that it is you and only you who will be responsible for all credit card charges and for paying all bills.
So, it is up to you to choose. Just make the right decision.
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