Should you recommend that your students get a credit card when they go off to college?

I recently signed in to my bank account online and a message came up on the home page “Start building credit today for college”. I might be about 30 years outside their demographic but it did cause me to take a quick look to see what they were offering.

They offered a $0 Annual Fee, plus a low APR rate for 6 months. In reading the fine print the rate then jumped to 17% after 6 months on any balance carried forward. They made some good points on why it might be good for a student to get a credit card when going to college.

1. It helps them establish a credit history that they will need once they graduate from college and begin buying things on credit. Without any history, it will be tough to get approved on an auto or house loan even with income verification.

2. It makes it easy to track their spending (and for parents to monitor it)

3. In an emergency they will always have readily available access to money to help them out.

These are all good points, but the things that came to my mind that could be problems for some students:

1. If unchecked they could run up a large balance which would incur massive interest charges each month.

2. Instead of helping establish their credit history they could ruin it if they aren’t educated first on how credit cards work and the importance of paying your balance in full each month and on time.

After weighing the pros and cons, I do think the pluses outweigh the minuses but when counseling them they should be made aware of how credit works and that there are consequences to running up a balance when you don’t have the funds to pay it. I also think capping the amount that can be charged on the card is pretty important for students in this age group until they show they have the means and maturity to handle the responsibility that comes with having their own credit.