Know someone making a difference who could use part of our $1 million donation?
What moms may want to ask before co-signing on a credit card
Posted by Manisha Thakor on posted on Oct. 23, 2017 12:00:00 PM
Since credit card regulations tightened in 2009, more parents are having to co-sign for their college-age children.
Designed to protect younger people who don’t have the financial means or the knowledge to handle debt, the Credit CARD Act forbids credit card companies from lending to your college-age kids—unless they can prove they have the means to pay the money back or (the more likely option) that YOU agree to co-sign and take full responsibility for that debt.
Riding on the coattails of your creditworthiness has obvious advantages for cash-strapped freshmen; especially if your credit score is north of 600, unlocking a world of relatively low APR offers that the uncreditworthy can only dream of. The downside risk is that they will overspend, forcing you to bail them out financially and jeopardizing your hard-earned credit score.
On the plus side, co-signing may give you some control over your child’s borrowing—which might have gone off the deep end had their cards been solely in their name. By keeping an eye on their spending, it reduces the chance they will splurge on Spring Breaks to Cancun, and other peer-pressured extravagances.
Consider laying down this rule
There is one ground rule you may consider establishing before you sign on any dotted line: Insist that they pay off the balance IN FULL every month.
Reckless spending is not the only big temptation for students. Reading a monthly bill and only seeing the “minimum payment” amount is an act of selective perception to which we are all susceptible—but especially stone-broke students inexperienced in the workings of compound interest.
So, even if your child is virtuously using their card for bare necessities, such as buying textbooks, let them know that credit cards can be financially ruinous if they only end up paying the bare minimum each month. This example might help:
1 “Students Are Still Saddled With Soaring Textbook Costs, report Says,” NBC News, February 2016
Teachers Insurance and Annuity Association of America has sponsored Ask the Expert posts for informational purposes only. Many of the experts are unaffiliated with Teachers Insurance and Annuity Association of America, College Retirement Equities Fund, and their affiliates and subsidiaries (collectively TIAA), and TIAA makes no representations regarding the accuracy or completeness of any information on the posts or otherwise made available by the experts. Statements of external featured experts are solely their own and are not endorsed or recommended by TIAA.
Responses from experts to questions posed by Woman2Woman community members are intentionally general in nature and are not intended to give personal, financial, or specific advice. Some strategies are complex, and more information is often needed to determine the personal needs of a community member. We strongly recommend that you consult with a financial advisor before taking any action based on an expertʼs opinion or other information you obtain from the Woman2Woman:Financial Living site so that all of your personal circumstances can be taken into consideration. Participation in the site does not render the member a client of the expert or of TIAA.
This site is not designed to accept or respond to requests or complaints regarding specific TIAA accounts, products or services. If you wish to discuss an issue of that nature, please contact TIAA at 800 842-2252. TIAA is not responsible for any opinions provided by members of this site. TIAA is not responsible for the content or privacy policies of third-party sites to which you may link.
The TIAA group of companies does not offer tax or legal advice. You should consult an independent tax or legal advisor for advice based on your own particular circumstances.
The material and responses are for informational or educational purposes only and do not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. The material and responses do not take into account any specific objectives or circumstances of any particular individual, or suggest any specific course of action. Investment decisions should be made in consultation with an investorʼs personal advisor based on the investorʼs own objectives and circumstances.
Experts may not have medical or scientific training. Any information related to physical or emotional health is not intended to be used in place of a consultation with a physician.
TIAA is not responsible for the statements of community members. We may link to posts made by community members only to direct you to topics that may be of interest to you. This does not mean that we agree with the opinions of these community members. Their statements are solely their own and are not endorsed or recommended by TIAA.