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Student credit card use is major decision for Arizona families

To obtain a credit card, The Credit Card Act states that a user under the age of 21 should either submit proof of income to repay credit card debt or have a qualified co-signor. As the law makes it harder for young adults to obtain credit cards, Arizona parents must decide whether their college-bound children should leave the house armed with credit cards.

The decision is significant, as co-signing for a child's debt makes parents responsible for their credit card debt if the child is unable to repay it. Since credit card debt can result in a Chapter 7 bankruptcy filing, as it provides respite from creditor harassment and unmanageable debt, parents may take the opportunity to teach their children the importance of financial decisions and the risks involved with taking on debt.

Some parents may wish to co-sign a credit card for teenagers if they demonstrate financial responsibility. If parents choose to co-sign, they may want to consider getting a card with a low limit and closely monitor all purchases so the child can build credit without increasing the risk.

Children also can be added as authorized users to a parent's existing bank account. Even though this means parents can oversee their children's spending and keep it in check, when cards have high credit limits there is the possibility that the card may be used too frequently.

For parents interested in helping their children build credit, learn money management and obtain a credit card, a secured credit card may be an option worth exploring. Since a pre-paid deposit finances the card, it is easier to obtain approval for than others.

Another option for students is to obtain a prepaid card, which is readily available at convenience stores and pharmacies. They carry major credit card logos and though similar to debit cards, they are not linked to checking accounts and may carry a number of fees.

However, it is still possible for a student under the age of 21 to obtain a credit card on his or her own since credit card companies determine if the user is financially able to make payments. For this reason, parents should consider educating their children on the importance of using a credit card to build credit rather than to purchase the latest brand of jeans.

Despite smart money management, it is possible for Arizona families to run up excessive debt and struggle with the resulting payments. In this situation, they may be wise to talk to a bankruptcy attorney about debt relief options.

Source: Daily Reporter, "Credit, debit or no card at all? Parents face choice as they prepare to send kids to college," Dave Carpenter, July 11, 2012