RSS feedThis is a million dollar question! Many parents are too afraid that their children will get into debt or simply ruin their credit at a young age. In my opinion, if you have enough faith to send your child away for college, then you at least should help him build his credit. Please keep in mind, having no credit history is just as bad as having bad credit. Based on my experience as a former executive of a corporate bank, I can tell you that no loans will be issued to clients who have no credit or bad credit.
The best way to help a young adult build his/her credit is simply apply for a card that requires no co-signor or have an income requirement for students. I am sure that you are wondering why credit card companies would want to take on such a risky business. Well, the answer is profit! Studies have shown that people are most loyal to the first company that will help them when they are in need, and will continue to use their services for the rest of their lives. For example, when I attended the University of Florida back in 1995, I tried numerous times to get a credit card. Yet, time after time I ended up receiving a decline letter. Then one day, I was discussing this issue with one of my friends. He informed me of this program that CitiCard is offering to college students. Within three weeks, I received my first credit card. Til this day, I am still carrying Citibank Card! Boy, getting over that huddle was tough!
http://www.nationwidecarddirectory.com/offer/citi-platinum-select-visa-card-for-college-students
Why is establishing credit important for students?
It is important for a young adult to start building his or her own credit, so when they get into the real world they would be able to get the best pricing on their major purchases. These major purchases are their vehicle and their house. Students, please never ask your parents to co-sign for you. If you are delinquent on your payments, it will negatively impact your parents' credit reports! Not only will this card help you manage your expenses easier, but it also gives you a 30 day interest-free cash flow (Smart Finance: use other people's money at no or low interest). I have started with a Citi Student Card similar to this one 13 years ago when I attended the University of Florida. Currently, I have over 800 credit score and my interest rate is 4.375% on my mortgage (never payoff your mortgage, it is good for tax write-off). Please keep in mind, the higher your credit score, the lower your interest rate will be when you decide to borrow money. It has a inverse effect. The range of credit score is from 350-850. One last thing, start off with this card for about 6 months (make sure you pay all of your payments on time), then come back and apply for 2 more cards (rebate and cash-back cards). When you apply for a loan in the future, lenders would want to see how you have managed your credits with at least three institutions. Rates can deviate up to 3% from its base price. Bankers call this deviation its risk margin. I call it "penalty points."
Take a minute and think how much money you will be saving over your lifetime. If you manage your credit score appropriately, you will be able to save tens of thousands of dollars over your lifetime. This saving could be added to your retirement account, which I will be talking about next week.
Please blog me here if you have any questions about financial planning, credit issues or to give me feedback.
David Lee
Financial Planner and Blogger for Nationwide Card Directory
Chase Platinum Card is the best card for people who have high interest on their current credit card(s) or simply want to use bank's fund to earn some extra money for themselves. I have been advising my clients to use the banks' fund at no or low interest. Lets break this topic into two separate discussions.
- Clients who currently have high interest rate on their existing credit cards should apply and transfer the balance to this card. 0% for 12 months is simply too good to pass! Please figure out how much it will save you before you proceed with the balance transfer. You need to also take the balance transfer fee of 3% of the amount of each transaction, but not less than $5.00 nor more than $75.00 into consideration.
- Clients who currently do not carry any balances should also apply for this card, because you too can take advantage of this offer. For example: You are approved for $10,000 credit limit for this card. You then decided to have the funds transfered to your Home Equity Line (HELOC) prior to opening a 12-month CD at 3.00% APY (sometimes the credit card company would not allow the funds to be transfered directly to your savings account, so you might need to have a HELOC setup with your local bank). You should always leave one hundred dollars in your credit line for the balance transfer fees. Let just say you decided to transfer $9,900.00 for 12 months at 0% interest, which will gross you $297.00 worth of interest. You then take $297.00 of interest minus $75.00 of balance transfer fee, which will net you $222.00 profit!
Most homeowners can apply for a HELOC at their local banks. HELOC is a home equity line of credit (make sure you ask for the HELOC card(s)), which banks issue to you a credit line based on the equity of your home. Most banks would not charge a fee to have this setup for you. They make money by charging you interest on the outstanding balance that you would carry. HELOC and credit cards are a great source of funds during rainy days. Please keep in mind that one must have decent credit and an employment to qualify for them. I would highly recommend that you get these setup as soon as possible, since there are massive layoffs in all fields across our country. This way you would have cashflow to keep you afloat while you are looking for another job.
Repeat this process several times a year, and you will end up with a few hundred dollars of discretionary income!
To apply for this card, simply click below:
http://www.nationwidecarddirectory.com/offer/chase-platinum-card
David Lee
Financial Planner & Blogger for Nationwide Card Directory