By Jim Donovan

By Jim Donovan

PHILADELPHIA (CBS) – It’s the time of year when hundreds of thousands of college students head back to school and we all know what that means, they’ll need spending money.

For years, many students would just apply for a credit card and charge up a storm.

But as 3-On Your Side Consumer Reporter Jim Donovan reminds us, banking reforms have made it more difficult for college students to get a credit card, but not impossible. So that’s why it’s important to have a talk with your child before they rack up lots of debt.

When the Federal Credit Card Act went into effect in 2010 it made it much harder for college students under the age of 21 to get a credit card. But there are students who can still get one.

“Someone who is working part time or full time and can show they can handle the payment on the credit card. The other is that if they have a co-singer, a parent or guardian, will co-sign, someone that has good credit,” says Stephanie Bittner of Clarifi, a local non-profit credit counseling agency.

Bittner believes most co-signers aren’t really thinking of the possible consequences.

“You’re going to be responsible for that debt or, in addition, it’s going to have a negative impact on your credit score if that account gets late or is not being paid at all,” she says.

An estimated 75% of college students are currently using credit cards. But other options exist, such as secured credit cards, debit cards, or pre-paid cards.

Bittner says those other options will “keep them from spending more money than they should be or getting themselves into debt that is ultimately something that they can’t handle.”

The bottom line for college students and their parents: be very cautious before you graduate to a full-fledged credit card.

Credit Card for Students: What’s Available Now?

• The Credit Card Act of 2009 – took effect 2½ years ago making it much harder, but not impossible, for anyone under 21 to get a card.
• Under-21s can still obtain a credit card if they have a qualified co-signer or proof of sufficient income to repay the debt.
• If you don’t think your college student is ready for a credit card, there are many options:

• Credit card issuers have differing standards in determining whether an applicant under 21 has the ability to make payments.
• Some may say it’s enough if he or she has a job and can afford the minimum monthly payment.
• Any student who gets a card should use it only for emergencies or otherwise pay it off immediately.

• Co-signing should only be an option if the student can use a credit card responsibly. If so, a card with a very low limit is a good way to start building credit without undue risk.
• Some students under 21 have upperclassmen, friends or siblings sign for them to avoid parental hassles. That could be a mistake for both sides. If the student can’t pay, the co-signer is responsible for all the debt and the credit history of both parties will be affected.

• These cards are backed by prepaid deposits, making them more manageable as well as relatively easy to obtain.
• Cards that report to a credit agency can help build the student’s credit score.
• When applying for a card, call and ask which agencies it reports to.

• If you don’t think your college kid is ready for a credit card, you can opt for a debit card linked to a checking account. The downside: These cards don’t help build credit scores.
• You should be able to set up email or text message alerts to be notified about any transaction that goes over a certain amount.

• These cards can be readily found at pharmacies and convenience stores and bear the MasterCard, Visa or American Express logo.
• They work like debit cards but are not connected to checking accounts.
• Many can be registered online so users can review transactions and balances.
• Although they are less risky in many ways, they don’t come with the same protections as credit and debit cards if lost or stolen. They also can come with a wide variety of fees.
• The American express prepaid card is one of the best options because it has fewer fees than most.

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