Back to school: Students and credit cards

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By Andrew Michalscheck By Andrew Michalscheck

PHOENIX -- At 19 years old, Kevin Davis has a passion for school and for basketball.  He also has a passion for staying out of debt. 

One way he does that is by not getting a credit card. 

"People are spending money that they don't have and they have to pay big interest rates," Davis tells 3 On Your Side.  "They get into debt and it's bad."

Michael Minyard agrees.  He runs his own accounting firm here in Phoenix called Minyard & Company and has seen first hand how his clients' children have run into credit card problems when they head off to school.

"We had one child who said,'I got to pay this?' when they got the bill," said Minyard.

So, how early is too early when it comes to a teenager getting a credit card?  Well, thanks to the Credit CARD Act of 2009, young adults under the age of 21 can't apply for a credit card unless they prove a solid income. 

Still, Minyard says it's a good idea for students to be introduced to credit card use before they ever leave home. 

"If you hand a kid a credit card and they go away to college, you're asking for a problem," Minyard said.

Minyard recommends putting your child on your credit card, and then closely monitoring their spending every month.

"We like the family to introduce their kids to credit cards while the parents can supervise it," said Minyard.

Going over the statement every month and teaching your child not to overspend is crucial.

As for Davis, he's taking his time getting a credit card.  For right now, the only plastic he intends on using is his debit card.  He understands it won't help him build credit, but he also realizes it won't get him to financial trouble. 

However,  he still realizes he would like to obtain a credit card down the road.  In fact, the college student is considering applying for a secured credit card which is a great way to build credit.

Secured credit cards work by giving a financial institution a set sum of money and in return they issue you a credit card.  However, consumers are not allowed to charge more than the amount they handed over. 

For example, if Davis applied for a secured a credit card for $500, then his credit limit would be $500. However, it's extremely important to pay off your balance in full every month and as you do, your credit will build.

Davis says he likes the idea of a secured credit card early in life, and will probably get a traditional credit card a few years down the road. 

"Well, I think they're good if you need to make a big purchase and build up your credit, but they (credit cards) also get you into a lot of trouble," he said.