She’s going off to college this fall and we’ve been bombarded with apps for credit cards but accidently threw away the one good one we thought we’d use.
I know there are hundreds of possibilitites but this one seemed to be somewhat unique so I thought somebody might know of one that stands out… both of us on the account but her primary so she can establish credit, no fee, nice grace period (if she doesn’t pay it off monthly I’ll throttle her).
TIA.
This belongs in IMHO, but I would suggest looking at bankrate.com to compare credit card deals.
This belongs in IMHO.
Stick with a big company like Capitol One, Chase or Citibank and negotiate the best rate, if you are the ‘primary’. It’ll be based on your credit rating. Also, her failure to pay means you take the credit rating hit.
It might be best to get her a ‘secured’ card from a trusted bank, on which she is the primary. If she fails to pay, she gets dinged on the credit, not you, and the bank will take the funds, plus penalty, from her account (her account at the bank is the secure collateral against her borrowing on the credit card). You have to put money in her account to secure the card, but this is really the best way out of the gate.
Bad debtors** couldn’t care less about being throttled**. If she has a ‘deadbeat’ gene, you could threaten to throttle her from now until 2020, and it won’t stop her. Don’t think that you can rest assured knowing you will throttle her. If she is bad with money, you’re screwed if you are on the account. She won’t lose sleep – you will.
I work in credit for a major credit reporting agency (15 years).
When I turned 18 I got an American Express Blue for Students, which I really like. Their “Blue” line of cards are credit cards, not charge cards, and this one in particular has no annual fee, not sure about the grace period, and I accumulate one “reward point” for every dollar I pay on the bill. Over about 3 years I’ve actually accumulated enough points to be useful (I changed them into Jetblue points, giving me the needed point boost to get a free round trip) - this makes me feel like I have a “real” “grown up” credit card! I applied for it on my own, with no previous lines of credit. Though my credit limit is pretty low, it’s still useful for the purpose of building a good credit history.
Also, the card itself is see-through…oooooh!
If you want her to build credit based on having the card be sure that she is on the card as a joint account holder and not just an authorized user.
It might be a good idea to have the bill come to your house for a while. Call her and have her send the money to you for payment. If she can’t handle it, you’ll know right up front before she digs herself in too deep. Also, you’ll be able to see what kind of stuff she’s spending it on. Some kids will charge 25 trips to McDonalds and not realize how that adds up.
I know she’s an adult, but as long as you’re involved in this somewhat, it might be good for her to have a “coach”, so to speak, who can help her build good habits.
I put my wife on one of my cards as an Authorized User.
It reported on her credit report just like she was a joint account holder.
If she can get a credit card on her own with no annual fee, why should you be on the account? To me, this just muddies the waters about the fact that charges she puts on there are bills she is expected to pay. In full. At the end of each month. If she actually needs credit, as opposed to just the convenience of paying with a card, there are better ways to get her a loan. And if she pays in full at the end of the month, the interest rate doesn’t matter. IMHO, the sooner she realizes that credit is a fully adult responsiblity of hers, the better.
Maybe you know a little more than I do on this, but isn’t Capital One crap? My beef with them is that they do not report your credit limits to the reporting agencies. Instead, the highest balance on that card is used in lieu of your credit limit. They are the only credit card issuer I know that does this. For example, let’s say I have a credit limit of $5000. I buy something for $300 and let’s say that’s my highest limit. If I only have one card, the credit agencies see that I have a balance of $300, with a credit limit of $300, therefore, I’m using 100% of my credit, and that does not look very good to anyone looking at your credit report.
I’m fairly sure this is still the case with them, because I have a Capital One card I do not use and when I checked my credit report a few weeks ago, the credit limit on that card still is only listed as my highest balance, which is probably about 1/3 of my total credit limit on that card.
Actually, here’s a lawsuit from a year ago about Capital One and the credit agencies. I’d be curious to hear if any headway were made on this.
If I were you I would discourage your daughter from getting a credit card. I would certainly not let myself be on the account.
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Yep, IMHO it is.
Moved.
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The responsible use of a credit card and the credit history it brings is a pretty important for finances later in life. I’d say go for a low-limit card and start building your credit score.
My kid got 2 credit cards - a VISA and one for JC Penney’s - she wanted to start establishing her own credit history. And she’s done pretty well for the most part. Then again, we tried teaching her how to handle money from the time she understood what money was. She’s always had a savings account, and in her first 3 years of college, she’s hardly ever had to ask us for financial help.
Guess it depends on the kid and how well the parents prepared said offspring for dealing with personal finances.
I agree with pulykamel - everyone needs to start somewhere. I was able to buy a house just based on my credit score, which was based on the good use of credit cards I’d started getting when I was in college.
You can fuck yourself over just as much by having no credit as you can by having bad credit.
As for having your name on the account - my brother had a bad history of credit. My dad co-signed with him on a car loan. My brother has a perfect payment history on that car loan because he fears the Wrath of Dad more than he fears the credit company. I think if you have a good relationship with your kid there’s nothing wrong with having a joint account.
I’ve been though this twice successfully.
Here is what we did. At age 18 we went to my bank, to open a checking account and debit card account for the KIQ (Kid in Question).
We (the banker and I) explained how a checking account and how a debit card work. The banker offered a credit card (VISA or MC I don’t recall) we (kid and I) accepted. Again we explained how they work, and how to build your credit score. The credit account had a fairly low limit to start with ($700-800 IIRC) The card was only in my child’s name.
After 5 months or so of regular payments, they jumped our kid’s limit. After about a year of good payments the credit card offers started coming out of the woodwork.
I’m sure there are plenty of other ways to do it, but this worked for us.
This is SO true! My dad, who was never late on a payment in his whole life, paid off the house and all other debt and retired. When his car took a dirt nap, he went to the dealership and they told him he was a bad credit risk because he doesn’t owe anyone any money. He bought the car with cash and a small loan and then paid it off within a few months. Then he started using his credit card (another thing that just never sat right with him, being a Depression Kid). He’s all good now with the credit just by using that card. It is definitely important to establish credit in today’s world.
Hmmm.
Seems to me like your dad’s outcome was best just paying cash anyway.
Still, though, it’s best to keep a card with minimal limts around. Go out to dinner on it once a month or something so they don’t close it as inactive, and pay it off when the bill comes.
Well, yeah…it mostly bugged him because he had been such a great debt payer and then they tell him his credit is virtually non-existent. I think he originally wanted to leave the money where it could work for him. I can understand that. He really doesn’t like to owe money and always pays the card off in full each month.
I can see the advantage of not paying fees to turn investments into liquid dollars but truthfully he is unlikely to get a car note with a risk-adjusted rate of return any better than he would be paying out in interest.
On edit:
Of course, psychology is a powerful thing. People can be very peculiar with money.