With the new credit card law slated to go into effect in February 2010, banks will no longer be able to issue credit cards to anyone under 21. Students able to prove they have the independent means to pay will be issued a card. So if students can’t get a credit card how do they build a credit history? Here are three ways cited in a recent Wall Street Journal article:
- Use a Debit Card to teach your child to charge only what is available in the account. He or she can graduate to a credit card after developing good habits.
- Make your child an Authorized User of one of your credit cards. The payment history then appears on the child’s credit file. This means you have to be a responsible parent when it comes to your finances.
- Use a Secured Card which requires a cash deposit be held at the bank and creates a “credit-limit” for the card.
Anyone of these methodologies or a combination will help you educate your teen while protecting your own credit history.