Co-Sign for a Credit Card?

Come next February, young people under the age of 21 will either have to provide proof of income in order to get a credit card, or have a parent or someone over 21 co-sign their application.

The idea, of course, is to make it tougher for young people to get credit (or get in trouble because of it). But that solution raises another big question: Should you sign for your child's credit card?

For years in this column I've advised that you not mix your credit record with your child's. New law or no, I haven't changed my opinion.

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• As long as kids have Mom or Dad to fall back on, they're unlikely to take full responsibility for using a credit card. As one parent once told me, "My kids never learned how to manage credit until they had to pay the bills themselves."
• If your kids screw up, your good credit record is on the line.
• College students under 21 don't really need a credit card. A checking account with a debit card will do, and is a great first step toward learning how to manage credit. In fact, Visa recently reported that measured by total dollar volume, purchases made using a Visa debit card surpassed credit-card purchases for the first time.

Over the years I've gotten a fair amount of pushback from parents who disagree with me.

I'm well aware, for example, that debit cards aren't the perfect solution. But kids can get into far less trouble paying a $30 overdraft fee than running up a credit-card balance of several hundred dollars or more.

And if they first learn how to balance a checking account and avoid overdraft fees, you can be pretty confident that they can be trusted to pay their credit-card bill on time.

There's also a feeling in some circles that kids should get a credit card as early as high school, when parents can supervise their behavior. I'm all for parents discussing credit and other financial topics with their kids. In fact, a recent study by researchers at the University of Arizona found that parents have more influence over their children's financial knowledge, attitudes and behavior than work experience and high-school financial education combined.

But there's no need to rush kids into becoming debtors-in-training. I just don't think there's any reason for a 16-year-old, say, to be using a credit card. Kids that age have enough trouble juggling schoolwork, extracurricular activities and possibly a job without keeping tabs on credit-card bills.

Parents who go this route need to be willing to spend time and energy monitoring their kids' spending and payment patterns. Yet a recent study by Sallie Mae found that about one-third of college students rarely or never talked about credit cards with their parents -- and they were more likely to be surprised at their account balances than kids who did discuss credit.

Then there's the argument that if you co-sign a card with your kids, they'll get the benefit of your presumably good credit rating when they apply for a card on their own.

But you don't owe your kids your credit rating. I'd rather have them apply for a card independently once they've proven they have the maturity and experience to handle it. Even if they have to pay a higher interest rate initially, they'll learn that credit is a privilege, not an entitlement.

Details to come

Specific regulations regarding the new law have yet to be written, and it's not clear what the effects will be.

For instance, what will qualify as a student's income? How will issuers market cards to kids and their parents? Will they introduce new types of cards geared toward 21-year-olds? Sensitive to criticism, issuers probably won't bombard students with offers this fall. But there could be a get-in-under-the-wire mindset.

Until the details become clearer (and even after), I'd recommend that both students and parents exercise caution. And I wouldn't be too quick to sign on the dotted line.