Credit Corner
Debit Vs. Credit for College Freshmen
Sending your child off to college is a major life change for both of you, and it’s essential that you send your freshman prepared. He will need access to funds for books and day-to-day necessities. Should you choose a pre-paid debit card or credit card?
Pre-paid debit cards are a great way to stick to your budget. By depositing a set amount of money into the account, the student is able to use the card to purchase needed items without exceeding your budget. Most universities now offer their version of a pre-paid debit card that also may function as an ID card. Some colleges refer to this card as a “Smart Card”; Bradley University offers the “Quick Card.” Students are able to use these cards both on and off campus at designated locations.
These cards are wonderful; however, they must be protected from theft and identity theft the same as a debit card. Many students don’t realize the amount of personal information contained on the card—much more than a regular debit card. Because the card allows access to meal plans, the library, bookstore, computer labs, and buildings on campus, personal information is needed to track each student. These cards also have been used in investigations of criminal activity, such as the recent Duke case, as information is gathered on the student and may be kept on file from 14 days to two years.
Another option is to send him off with a credit card. If you choose this option, here are some guidelines:
• For what purpose will your student be able to use the card? In order not to incur debt, the credit card should be used for a specific purpose. If it’s for emergency purposes only, decide what constitutes an emergency.
• Don’t apply for a credit card to obtain advertising promotions such as a CD, T-shirt, or water bottle.
• Compare different creditors for annual percentage rates, annual fees, and late and over-limit fees.
• Be sure payments are made in full and on time to avoid a negative impact on any future credit.
• Avoid using the credit card for cash advances. Interest rates on cash advances generally are much higher.
Whether you choose a pre-paid debit card or a credit card, make sure your child realizes that what’s done today may affect his credit in the future. Maintenance of an account and payment history shows on a credit report for seven years, so educate him to ensure a bright future after graduation. TPW
Pre-paid debit cards are a great way to stick to your budget. By depositing a set amount of money into the account, the student is able to use the card to purchase needed items without exceeding your budget. Most universities now offer their version of a pre-paid debit card that also may function as an ID card. Some colleges refer to this card as a “Smart Card”; Bradley University offers the “Quick Card.” Students are able to use these cards both on and off campus at designated locations.
These cards are wonderful; however, they must be protected from theft and identity theft the same as a debit card. Many students don’t realize the amount of personal information contained on the card—much more than a regular debit card. Because the card allows access to meal plans, the library, bookstore, computer labs, and buildings on campus, personal information is needed to track each student. These cards also have been used in investigations of criminal activity, such as the recent Duke case, as information is gathered on the student and may be kept on file from 14 days to two years.
Another option is to send him off with a credit card. If you choose this option, here are some guidelines:
• For what purpose will your student be able to use the card? In order not to incur debt, the credit card should be used for a specific purpose. If it’s for emergency purposes only, decide what constitutes an emergency.
• Don’t apply for a credit card to obtain advertising promotions such as a CD, T-shirt, or water bottle.
• Compare different creditors for annual percentage rates, annual fees, and late and over-limit fees.
• Be sure payments are made in full and on time to avoid a negative impact on any future credit.
• Avoid using the credit card for cash advances. Interest rates on cash advances generally are much higher.
Whether you choose a pre-paid debit card or a credit card, make sure your child realizes that what’s done today may affect his credit in the future. Maintenance of an account and payment history shows on a credit report for seven years, so educate him to ensure a bright future after graduation. TPW