Some parents may be co-signing for a college-aged child's credit card account because they want their child to have access to some money in case of emergency, and other parents do it because they want to teach their how to responsibly deal with credit card debt, according to a report from Reuters. But some are taking alternative action.
The report said some parents are now linking their child to their own credit card accounts. This way, they can not only monitor what their kid is racking up credit card debt on, but can also teach lessons about fiscal responsibility.
Many parents believe their child isn't quite ready to begin dealing with credit card debt on their own, the report said. A poll conducted last July by the National Endowment for Financial Education found 61 percent of parents won't co-sign on a child's credit card application, and another 16 percent said they weren't sure whether they would.
"First, they go in with a life jacket – a card linked to my account," James Gallo, a New Jersey father of two, told the news service. "Then, maybe some 'floaties' – a co-signed card. Then, they go in the water by themselves, knowing that I am by the pool ready to throw in a line when they screw up. Finally, after they swallow a little water, they come out with respect for the water but knowing they can swim alone."
However, some experts urge easing children into the world of credit card debt, by giving them a debit card to see if they can handle a finite amount of money, the report said. For this reason, prepaid credit cards are also popular with some parents. However, because these accounts do not allow a user to start their credit history, other parents may avoid it.
Prior to the implementation of the new rules designed to protect those under 21 from the dangers of out of control credit card debt, the average college senior was graduating with several credit card accounts and thousands of dollars of debt in their name.