Credit Card/Debit Card for college student

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lgb
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Credit Card/Debit Card for college student

Post by lgb »

We have an incoming freshman going into college. Works and mainly uses cash for purchases today and uses Debit card to get cash from ATM. Recently signed up for Paypal account linked to local Bank Debit card (checking account) to pay for online transactions. Which spouse and I felt a bit safer than handing over your Local Bank Debit card number online. (concern of being compromised and getting cleared out and hassle of getting it straightened out)

Spouse is hesitant to suggest using local Bank Debit card for store transactions and gas due to being a victim of fake swipe machine scam, so son is paying cash for gas and other stuff mainly (some small store transactions with Debit card). Seemingly things fine, but would like to just have ability to do online transactions (which paypal allows, except not with Amazon - would require a Paypal Cash Card (physical card) to be linked to the local Bank Debit card that would get funded from that local Bank checking account.

I'm very hesitant to suggest any sort of actual Credit Card where you 'pay later' as I feel you need to just get used to spending 'your' actual money, not 'future' money you might have. Spouse thinks son should maybe get a Credit Card to build up credit for some reason. Son feels handcuffed since it seems the Debit card should be able to be used for online transactions and in-store stuff..but due to online security concerns using the local Bank Debit card we've introduced paypal into the picture, and due to skimming concerns at physical stores we 'mostly' avoid using the Debit Card.

Spouse believes the Credit card provides more protection than Debit Card if you were to get compromised and had to explain to Bank you didn't ring up all these strange charges.. I think spouse is somewhat correct ....they provide the same protection, but the Credit card will more quickly put money back in your account, whereas the Debit card could take longer to investigate - in either case you have to be diligent and alert fast to the bank and or Credit card company if something seems fishy. To me that is fine - it makes you more responsible and accountable for 'your' money.

Paypal seems to have a Cash Card you can physically get sent to you that has a $400 limit daily (fine) - and is taken wherever Mastercard can be taken (fine) - and is basically like a Pre-Paid Debit card that could be loaded up from the local Bank account. Doesn't seem to have fees, or where it does it is for things that don't seem likely to be invoked. Maybe the local Bank has something similar - havent' checked.

Any thoughts or strategies? I just don't want them really getting into credit card debt and want them to get used to spending money they actually have to get a good feel of expenses spent and when. Feel like the Credit Card gives you enough time to kind of 'forget' about everything (on purpose) and puts you into a mindset of its normal to just 'owe somebody and pay later' and normalizes that mind set (which I think is kind of toxic) instead of getting used to be quite cognizant of how much money you have and what something costs and that you're paying for it now, with your money. ...but I'm hypocritical, as I do use a credit card and cash (rarely a debit card, spouse uses all three cash, debit and credit)
Carson
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Re: Credit Card/Debit Card for college student

Post by Carson »

I think a lower limit credit card is the way to go. Explain that it's to be used for the needed purchases, and paid off every month well before the due date. My dad got me a credit card when I was 16 and I've used it routinely and never paid a dollar of interest or fees. Make it a lower limit if you think he'll accidentally abuse it.

Many banks have apps that make this pretty easy. It's nice if you can access both the checking and credit accounts in the same app; I can do this with capital one and think it would be extremely easy for a kid to understand. "Back in the day" I had to call the customer service number and have a customer service rep tell me the transactions that posted so I could write a check and pay before the due date.
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Re: Credit Card/Debit Card for college student

Post by Jack FFR1846 »

Older son was made authorized user on my Fidelity CC. I can, of course, see every single transaction to keep track of spending.

Younger son was made authorized user on my Cap One cash back card. I can, of course, see every single transaction to keep track of spending.

I don't understand why anyone would ever use a debit card to buy anything. The protections are not as good as a credit card and if there is fraud, your ability to get your money from your account could require you to wait until the bank figures it all out.
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livesoft
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Re: Credit Card/Debit Card for college student

Post by livesoft »

My youngest child has never needed a credit card and doesn't have one. He graduated from college. He does have a checking account, but has never written checks. His checking account has the ATM/debit card that he uses. If he needs a check, he goes and gets a money order even though his bank would give him free checks if he asked.

My oldest didn't get a credit card until she got a job after graduating from college.

Bottom line: Let your college student figure this out on their own. They need to learn how to be an adult.
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Watty
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Re: Credit Card/Debit Card for college student

Post by Watty »

Jack FFR1846 wrote: Thu Jun 18, 2020 8:05 am I don't understand why anyone would ever use a debit card to buy anything. The protections are not as good as a credit card and if there is fraud, your ability to get your money from your account could require you to wait until the bank figures it all out.
+1000

Especially for online purchases.

If you insist the bank will likely give you a plain ATM card even if initially say that they don't have those now. I had a bank say that but when I told them they if they could not issue an ATM card then I would be closing my modest size account. I was put on hold for about 30 seconds then they said I would get my ATM car in the mail in a few days.

I also make it a point of not having a credit card at any place that I have any money in checking or savings accounts. The reason is that in the fine print of the agreements they have a "right of offset"(Google this) where they are allowed to take money out of your accounts without notice to pay off your credit card. This is not a theoretical situation they actually do this when there is a dispute. Here is a recent post where someone ran into that.

viewtopic.php?t=302700
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SmileyFace
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Re: Credit Card/Debit Card for college student

Post by SmileyFace »

I had our kids become authorized user's on our credit cards when they got their driver's licenses. It made it easier for them to go out and buy take-out food or pick up a few groceries for the family and just "Charge it to the house". They weren't allowed to use the card for purchases without permission first (for clothing, etc.). At times they would use the card out of convenience and then pay me back. I always watch charges like a hawk (click the App almost daily) and they are both trust-worthy so there was never a concern. When they entered college they both primarily used their debit card for their stuff. Yes - less secure - but they both learned to keep minimal amounts in checking tied to the card and transfer money from Savings to Checking as needed. Thus - if the cards were ever compromised they wouldn't be out much before recovery.
Fast forward to today and one did get a credit card - the other still isn't comfortable with the concept. Agree with livesoft - give them suggestions but they will figure out what they need and what works for them.
Side Note: I later found out that making them authorized user's on my card gave them excellent credit scores.
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lgb
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Re: Credit Card/Debit Card for college student

Post by lgb »

DaftInvestor wrote: Thu Jun 18, 2020 8:24 am I had our kids become authorized user's on our credit cards when they got their driver's licenses. It made it easier for them to go out and buy take-out food or pick up a few groceries for the family and just "Charge it to the house". They weren't allowed to use the card for purchases without permission first (for clothing, etc.). At times they would use the card out of convenience and then pay me back. I always watch charges like a hawk (click the App almost daily) and they are both trust-worthy so there was never a concern. When they entered college they both primarily used their debit card for their stuff. Yes - less secure - but they both learned to keep minimal amounts in checking tied to the card and transfer money from Savings to Checking as needed. Thus - if the cards were ever compromised they wouldn't be out much before recovery.
Fast forward to today and one did get a credit card - the other still isn't comfortable with the concept. Agree with livesoft - give them suggestions but they will figure out what they need and what works for them.
Side Note: I later found out that making them authorized user's on my card gave them excellent credit scores.
Interesting - didn't know that last little bit. Not sure I could convince spouse to get on board with Child using our credit card for purchases. I do agree in letting the child feel this out on their own with our suggestions that others have suggested. Child seems to feel that the Credit Card thing isn't what is desired and would be hard to keep track of. (I happen to agree) Child just simply wants to have the freedom to spend their money they're earning online (for stuff not found at stores) and also to use at stores without necessarily having cash and resolving the Debit Card skimmer concern (which I myself view as a minimal threat, even with spouse having actually been a victim of a skimmer at a 'bank' of all places...)
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Re: Credit Card/Debit Card for college student

Post by crefwatch »

My high-school match teacher (1968-ish) taught how to write checks and operate a checking account. Certainly using a credit card is a part of financial literacy today. I'm old enough to remember when banks first started to issue revolving credit cards. I urge you to make a realistic assessment of how much your child understands about the difference between money on a credit card and "cash."

It is not meant as an insult to your child, but I remember that my favorite aunt, a social worker, had tremendous trouble getting her clients in the 1970s to understand that spending money with a credit card (and carrying a crushing balance ... ) was not the same as spending cash from their wallets. I'm only suggesting that you ask yourselves, realistically, "What does he understand about .... spending ... virtual money?" In that sense, having the bill come to you is not very educational.
runner540
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Re: Credit Card/Debit Card for college student

Post by runner540 »

If he sets up YNAB budget app and links his bank account and credit card, then he has to account for the dollars as they are spent.
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SmileyFace
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Re: Credit Card/Debit Card for college student

Post by SmileyFace »

lgb wrote: Thu Jun 18, 2020 8:40 am
DaftInvestor wrote: Thu Jun 18, 2020 8:24 am I had our kids become authorized user's on our credit cards when they got their driver's licenses. It made it easier for them to go out and buy take-out food or pick up a few groceries for the family and just "Charge it to the house". They weren't allowed to use the card for purchases without permission first (for clothing, etc.). At times they would use the card out of convenience and then pay me back. I always watch charges like a hawk (click the App almost daily) and they are both trust-worthy so there was never a concern. When they entered college they both primarily used their debit card for their stuff. Yes - less secure - but they both learned to keep minimal amounts in checking tied to the card and transfer money from Savings to Checking as needed. Thus - if the cards were ever compromised they wouldn't be out much before recovery.
Fast forward to today and one did get a credit card - the other still isn't comfortable with the concept. Agree with livesoft - give them suggestions but they will figure out what they need and what works for them.
Side Note: I later found out that making them authorized user's on my card gave them excellent credit scores.
Interesting - didn't know that last little bit. Not sure I could convince spouse to get on board with Child using our credit card for purchases. I do agree in letting the child feel this out on their own with our suggestions that others have suggested. Child seems to feel that the Credit Card thing isn't what is desired and would be hard to keep track of. (I happen to agree) Child just simply wants to have the freedom to spend their money they're earning online (for stuff not found at stores) and also to use at stores without necessarily having cash and resolving the Debit Card skimmer concern (which I myself view as a minimal threat, even with spouse having actually been a victim of a skimmer at a 'bank' of all places...)
You could make them an authorized user on a card you don't typically use - watch it like a hawk - and either insists on cash every time it is used - or simply link your banking accounts (we did this with one of my daughters that was away at college - originally as a way to give her a monthly stipend - but it also became a convenient way of getting money she owed us) and transfer the money they use on it from their account to yours when they use the card. It is one way of many to get them used to the idea that it is convenient but is REAL money. What my kids both find is that their debit cards don't always work for online purchase. It might be the bank they use or some other reason - but sometimes the online transactions gets blocked. They would then flip to the credit card - let me know and pay me back.
CycloRista
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Re: Credit Card/Debit Card for college student

Post by CycloRista »

Definitely recommend obtaining a low limit credit card so that your child can establish credit and learn how to manage using a "tool" as opposed to ATM cash machine to nowhere (with greater exposure and reimbursement hassles if it gets skimmed).

It is important to set guidelines up front. I made it clear with my kids that the extent of my involvement was to provide guidance whenever they had questions and to cosign so they could get started. They were responsible for making payments and we went over and over how important it is to pay the full balance each month, on time.

My older kid did got hit with late fees on occasion and got into trouble by signing up for other cards that she didn't fess up to for months. I helped her structure paying the debt off then, she managed to socially engineer a payoff from one of my outlaws SMH

The younger one has paid monthly like clockwork and has established good spending and saving habits.
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lgb
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Re: Credit Card/Debit Card for college student

Post by lgb »

crefwatch wrote: Thu Jun 18, 2020 8:50 am My high-school match teacher (1968-ish) taught how to write checks and operate a checking account. Certainly using a credit card is a part of financial literacy today. I'm old enough to remember when banks first started to issue revolving credit cards. I urge you to make a realistic assessment of how much your child understands about the difference between money on a credit card and "cash."

It is not meant as an insult to your child, but I remember that my favorite aunt, a social worker, had tremendous trouble getting her clients in the 1970s to understand that spending money with a credit card (and carrying a crushing balance ... ) was not the same as spending cash from their wallets. I'm only suggesting that you ask yourselves, realistically, "What does he understand about .... spending ... virtual money?" In that sense, having the bill come to you is not very educational.
I agree with this entirely myself at least - as far as spending using 'our' credit card - I feel that misses an opportunity to learn/experience something... and the concern is shared, not viewed as an insult. I very much believe they are 2 entirely different things both equally needing understanding of how/when/if to use etc...
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SmileyFace
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Re: Credit Card/Debit Card for college student

Post by SmileyFace »

lgb wrote: Thu Jun 18, 2020 9:30 am I agree with this entirely myself at least - as far as spending using 'our' credit card - I feel that misses an opportunity to learn/experience something... and the concern is shared, not viewed as an insult. I very much believe they are 2 entirely different things both equally needing understanding of how/when/if to use etc...
:sharebeer
The original reason we made our kids authorized users on our is because they couldn't qualify for their own. I don't know how much your kids make (you MUST have your own income history) or if they will qualify but realize times have changed. (When I went to college the credit card companies had tables on campus - they would give cards to anyone who would provide a name and SS# - they didn't care back then. Then new legislation - CARD act of 2009 - prevented them from doing this).
If they don't qualify for a standard credit card their are other options (pre-loaded cards, etc.).
b5_s4_fan
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Re: Credit Card/Debit Card for college student

Post by b5_s4_fan »

I'm a recent college graduate who didn't get a credit card until my senior year, and I really wish I had gotten one sooner.

Using a credit card responsibly for 4 years of college would mean that you would graduate with well over a 750 credit score. Car loans, mortgages, applying for apartments, job background checks are all good reasons to have an established credit score. Fraud protection, credit score building, and rewards points are all great reasons to use a credit card.

I'm not a parent, so I can't speak to any specific concerns of risk tolerance. I will say that modern banking apps makes it very easy to see exactly how much you owe and to set up automatic payments. There are even applications that will instantly pay off your credit card balance, effectively making it a debit card. As a final safety net, using a secured card will ensure that you can't go upside down by making a series of impulsive purchases. The Discover IT secured is a good option and can be later upgraded to the standard IT card, which is an excellent all around card for college students.

In summary, college is a time to learn and grow, and to prepare you for the challenges of the future. Let your kid have a card, and they will learn about responsible credit usage, and be several years ahead on having an established credit history as they transition into the adult world.
RetiredAL
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Re: Credit Card/Debit Card for college student

Post by RetiredAL »

lgb wrote: Thu Jun 18, 2020 7:34 am We have an incoming freshman going into college. Works and mainly uses cash for purchases today and uses Debit card to get cash from ATM......

I'm very hesitant to suggest any sort of actual Credit Card.......
OP, consider doing what I did. With 2 of my of my kid's, we went down to the bank and opened a joint checking account and joint credit card account with them as the primary. Although they would have issued a high limit credit card based on me, I had them only do a few thousand.

First child was to soon be headed off to college 1200 miles away. This immediately started a 'good standing' credit record under her name/SS# and as co-owner and I had full access to help her manage the accounts. She was taught that a credit card was a payment device, not a loan device, to be paid each month out of her job earnings, her MomDad stipend, and her UGMA. First year was in the dorm's, then off to a shared rental, where her credit record was beneficial as I did not have to co-sign the lease. Somewhat before she graduated, I removed my name from those accounts.

My 3rd decided to do it himself and started with a very low limit secured card, them acquired a regular card a year later. A couple of years later he added me a joint as he was headed off to AU for 6 month's and needed someone to look after getting everything paid while he was gone. He quickly got AU accounts to use while down under.
cowbman
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Re: Credit Card/Debit Card for college student

Post by cowbman »

OP,

As others have suggested, you can always make the student an authorized user. If you trust them and think they will not overspend, starting a credit card will help them build credit. The Discover Student card is a great one. Also, the Paypal credit card is good if you plan on making sure they pay off every bill.
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beyou
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Re: Credit Card/Debit Card for college student

Post by beyou »

If your child applies for their own card, be sure they search for those marketed to students. They wont be the ones wont the best cash back or points, those are reserved for applicants of highest credit ratings.

My kids were under 18 traveling so I gave them auth user cards as a temporary solution, and took them back when they were over 18 and qualified for their own card. Auth user helped qualify them no doubt.
neverpanic
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Re: Credit Card/Debit Card for college student

Post by neverpanic »

livesoft wrote: Thu Jun 18, 2020 8:10 am Bottom line: Let your college student figure this out on their own. They need to learn how to be an adult.
We all grow up in different worlds and those worlds are changing all the time. More importantly, we all have different aptitudes.

My parents took your approach and over time, I paid countless thousands in interest, fees, etc. I wish they had taught me more about credit, but at the same time, they could not have known that credit card companies would be endorsed by the schools, because that's not the world they had grown up in.

Now, as my own goes off to college, she is armed with all the knowledge possible about credit and she also has her own credit and debit cards. I control her credit limit (for now) and she has to budget her own money on the debit card. She's an adult, though. So, if she chooses to sign on the bottom line and get her own credit card that I know nothing about, she has that right. I just have to hope she is sufficiently intelligent to avoid the traps I walked into so willingly.
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Re: Credit Card/Debit Card for college student

Post by neverpanic »

cowbman wrote: Fri Jun 19, 2020 10:36 am As others have suggested, you can always make the student an authorized user. If you trust them and think they will not overspend, starting a credit card will help them build credit. The Discover Student card is a great one. Also, the Paypal credit card is good if you plan on making sure they pay off every bill.
Years ago, the "authorized user" had whatever credit limit the card's owner had. But today, numerous card issuers allow the card owner to set unique credit limits for each authorized user. Even if a card has a $25k limit, the owner can set little Johnny's limit at $300 and then allow him to earn credit increases over time with responsible use and repayment (if necessary).
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neverpanic
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Re: Credit Card/Debit Card for college student

Post by neverpanic »

DaftInvestor wrote: Thu Jun 18, 2020 8:24 am Side Note: I later found out that making them authorized user's on my card gave them excellent credit scores.
Others will argue, but I strongly agree with this. Why should lenders be able to so easily profit in order to "teach my kid a lesson" about how credit works? It's a lot less expensive if I do the teaching, which means our family will then have more money to do other things we might enjoy, which includes providing more wealth to the next generation.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
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Re: Credit Card/Debit Card for college student

Post by Broken Man 1999 »

b5_s4_fan wrote: Thu Jun 18, 2020 10:21 am I'm a recent college graduate who didn't get a credit card until my senior year, and I really wish I had gotten one sooner.

Using a credit card responsibly for 4 years of college would mean that you would graduate with well over a 750 credit score. Car loans, mortgages, applying for apartments, job background checks are all good reasons to have an established credit score. Fraud protection, credit score building, and rewards points are all great reasons to use a credit card.

I'm not a parent, so I can't speak to any specific concerns of risk tolerance. I will say that modern banking apps makes it very easy to see exactly how much you owe and to set up automatic payments. There are even applications that will instantly pay off your credit card balance, effectively making it a debit card. As a final safety net, using a secured card will ensure that you can't go upside down by making a series of impulsive purchases. The Discover IT secured is a good option and can be later upgraded to the standard IT card, which is an excellent all around card for college students.

In summary, college is a time to learn and grow, and to prepare you for the challenges of the future. Let your kid have a card, and they will learn about responsible credit usage, and be several years ahead on having an established credit history as they transition into the adult world.
Well said!

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momvesting
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Re: Credit Card/Debit Card for college student

Post by momvesting »

AMEX has the perfect solution for this. You can make your kid an authorized user but also you can set an individual spending limit for their card. My daughter’s is set at $150. You (the parent) can raise or lower the limit on the AMEX website very easily, for example, we raised hers temporarily when she filled out college applications this fall. I quite frequently raise or lower it as she communicates what she needs it for. She pays us for what she buys unless it is something we have asked her to buy or do for us (like putting gas in my car or running to the grocery store). Also, on the AMEX site if you are sending small dollar amounts as payments, you can apply them towards specific purchases, like I can raise her limit, she can spend the money (like the college apps), we can pay off those specific purchases, and I can lower her limit again without messing with my bill cycle or when I planned to pay off my purchases. We have been very happy using AMEX for a teenager. Not sure if all cards do this, we have Blue Cash Preferred.
livesoft
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Re: Credit Card/Debit Card for college student

Post by livesoft »

neverpanic wrote: Fri Jun 19, 2020 12:25 pm
livesoft wrote: Thu Jun 18, 2020 8:10 am Bottom line: Let your college student figure this out on their own. They need to learn how to be an adult.
[...]
Now, as my own goes off to college, she is armed with all the knowledge possible about credit and ....
Certainly my children are armed with plenty of knowledge about credit. We have not told them they could not get credit cards on their own. Indeed, I have told me kids to get credit cards. The oldest certainly has credit cards. The youngest has chosen not to apply for any credit cards.
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Re: Credit Card/Debit Card for college student

Post by Doom&Gloom »

momvesting wrote: Fri Jun 19, 2020 12:39 pm AMEX has the perfect solution for this. You can make your kid an authorized user but also you can set an individual spending limit for their card. My daughter’s is set at $150. You (the parent) can raise or lower the limit on the AMEX website very easily, for example, we raised hers temporarily when she filled out college applications this fall. I quite frequently raise or lower it as she communicates what she needs it for. She pays us for what she buys unless it is something we have asked her to buy or do for us (like putting gas in my car or running to the grocery store). Also, on the AMEX site if you are sending small dollar amounts as payments, you can apply them towards specific purchases, like I can raise her limit, she can spend the money (like the college apps), we can pay off those specific purchases, and I can lower her limit again without messing with my bill cycle or when I planned to pay off my purchases. We have been very happy using AMEX for a teenager. Not sure if all cards do this, we have Blue Cash Preferred.
+1
AMEX makes it very easy to limit and monitor the AU's spending.
Pdxnative
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Re: Credit Card/Debit Card for college student

Post by Pdxnative »

As others have said, making the student an authorized user on one of your cards is a good solution, although then they aren’t learning to pay the bill unless you work out a system for that. We did the auth user thing for a few years in HS, then a student visa once the kid had a job and could qualify. The auth user boost to credit was helpful there. I’d say get one or the other set up before school unless you have concerns about your kid’s ability or desire to manage credit. You’re taking a much bigger risk linking PayPal to your bank account than you’re adding with a credit card.
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Re: Credit Card/Debit Card for college student

Post by bloom2708 »

Our oldest kid (college) qualified for a $300 Deserve credit card without any co-signer.

https://www.deserve.com/credit-cards/

We could have added her as an authorized user on any of our cards.

I think this card will be good. Low limit. Start establishing her own credit. I said start by charging your gas and then pay it off a few days later.

We did try a couple of other student cards, but she was declined due to lack of income. Not surprising. She basically brings in about $5k working in the summer/limited part time during school.
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