Student Loan Alternative

by : MIKE SELVON



College can be a tough time for parents. First, you see your children leaving the protection of home where you cannot monitor their lives. It is a struggle giving up that power and not knowing if your children are in danger. Second, the college years is an expensive time when money always seems tight.

You do not want them getting into student credit card debt, but you want them to have something in case of an emergency. Unsecured credit cards are everywhere but may not be the right answer to helping them learn financial responsibility. Why not try prepaid credit cards as a solution?

Prepaid credit cards are very similar to unsecured credit cards and can be used anywhere bank credit cards, MasterCard or Visa credit cards, or debit cards can be used. The difference is that the prepaid card acts more like a debit card. You deposit money into the account and your child can only use that amount.

There is no need to worry about them going over the limit and you can track how much money they are spending on a monthly basis. An additional bonus is in knowing that your child is learning how to manage their money.

So why use a prepaid credit card instead of bank credit cards? The first reason is that a bank one can exceed the balance in the checking account if it is linked to the account. This can cause over limit fees to rapidly accumulate.

A bank one, if it is not tied to the checking account, is reliant upon credit scores. If your child has not established a credit rating, then he or she can be turned down. Each time a lender runs an application, the credit score can be harmed and lowered. This perpetuates the cycle of applying and then the subsequent denial, based on the credit scores.

Prepaid credit cards can also be given as gifts. If you do not know what to get your student for his or her birthday or graduation, a prepaid card can be perfect. Unlike a gift card from a particular store, a prepaid credit card can be used anywhere that accepts credit or debit cards.

It is a responsible way to learn how to use credit, without the worries of a monthly bill. For students in college, this can be the start of a great future with a good credit score. Think of it as helping your child to learn responsible spending, without the worry of huge interest rates.