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It's Time to Talk Credit Cards With Your College-Bound Kid

If you carry a balance, do not charge food, clothing, entertainment and other non-emergency items. It is foolish to pay high interest rates on pizza and clothes purchases.

Before applying for any credit card, make them understand the importance of paying off the entire balance on time each month and create that good habit by the first bill. If they can't afford a payment with cash, they can't afford it with a credit card.

Finally, use your own struggles and mistakes as lessons and warnings for your children. Teach them about the consequences of missed payments, or just paying the minimum payment.

2. Debit cards

These cards are tied to checking accounts and are easy to obtain if you have an account. However, debit cards do not help build credit scores and they may not provide enough cash during an emergency. Online account alerts can notify you when the account falls below a specified balance. Fees are increasing for checking accounts and debit cards so teach your student about ATM fees, insufficient funds fees and overdraft fees.

3. Prepaid cards

Banks and credit card issuers have enthusiastically jumped into the prepaid market because there are fewer regulations and a wide variety of fees. Some prepaid cards are now presented as alternatives to checking accounts with direct deposit, bill payment and ATM withdrawal.

Prepaid cards don't charge interest rates, but the fees can quickly erode the value of the card. Good options are the American Express Prepaid Card and Chase Liquid because they have fewer fees than most prepaid cards.

4. Secured cards

Secured cards are relatively easy for anyone to get because they are secured by a prepaid deposit. They also have many fees and high interest rates so compare the terms and conditions before applying. A secured card can help build your credit score if it reports to a credit agency. However, some cards don't report to credit agencies, so call the issuer to verify. Secured cards from Orchard Bank and Public Savings Bank both report to credit agencies.

Understanding credit's long-term implications

1. Credit scores

Teach your student that credit scores are almost as important as test scores. These records start early, so the mistakes they make today will still be on their credit report years from now. Show them a copy of your own credit report and explain how much creditors know about you -- everything from late payments on rent to the available balance on a credit card. Landlords, insurance agents and employers will use credit scores for judgments, interest rates and job offers.

2. College loans

The cost of college is expensive and overwhelming. It is much easier to enroll today and worry about payment tomorrow. Since your student will be responsible for the student loan, this is the time share the overall tuition numbers and be clear about how long it will take to pay it off. The traditional repayment period for student loans is 10 years; however, payments can be stretched out to 20 or even 30 years with a greater amount of interest penalties.

--By Bill Hardekopf

Bill Hardekopf is chief executive of LowCards.com, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."

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