RICHMOND, VA (WWBT) – Would you co-sign for your child to get a credit card? Before you say yes, financial experts say make sure you're ready to pay up if your child doesn't pay the bill.
College campuses have always been prime targets for credit card companies, but the Credit Card act of 2009, changed the game.
Bruce Whitehurst, President of Virginia Bankers Association says students under 21 must now prove they can pay.
"It would be hard to imagine a college student, for example, who does not have some kind of part-time employment qualifying for a credit card on his or her own," he said.
The new rules mean more students turning to mom and dad to co-sign. But remember, if your child doesn't pay you are responsible for the debt. Virginia schools are working to teach students financial responsibility before they reach college.
"Beginning this Fall, there is a brand new required high school course that all Virginia Ninth Graders will have to finish by the time they finish high school in Economics and Personal Finance," Whitehurst explained.
Without some ground rules and limitations -- University of Richmond Business Professor, Tom Arnold, says co-signing could turn into a financial disaster.
"Probably the worse thing that could happen is if you co-sign on a child's credit card and the child runs it all the way to the max and you go and bail them out, then the lesson they have learned is that someone will bail me out," he said.
Yes, they are your kids but remember, it's your money and some financial experts say a good idea to protect your cash, if you plan on co-signing, is to get your child to sign a contract.
"If we were to co-sign for our children we would have some kind of agreement with our children and it would certainly include online access to view their activity," said Whitehurst.
Parents should choose a card with a low limit and have the statements sent to their home, or check it online regularly. Experts say you may also want to make a deal with your child.
"In other words, you can almost be like a credit card company yourself, you establish a certain amount of assets and then I am going to be willing to let you go and get a credit card," Arnold said.
The goal here, your child's assets will be valuable enough for them to make the credit card payment -- if not, you collect. Another suggestion, rather than co-signing for your child, just add them to your credit card.
For more helpful advice, click the links below:
Copyright 2011 WWBT NBC12. All rights reserved.
635 W. 7th Street