Transcripts

"Money File"-Financial Responsibility 101

JEFF YASTINE: In tonight's money file, a lesson in financial responsibility for new college students. Here's Terri Cullen, personal finance columnist for the "Wall Street Journal" online.

TERRI CULLEN, PERSONAL FINANCE COLUMNIST, THE WALL STREET JOURNAL ONLINE: As students head off to college for the first time, many are about to get their first lesson in the dangers of credit card debt. This time of year credit card companies bombard students with offers of easy credit, luring them with a host of tempting freebies like university T-shirts and coffee mugs. So now is a good time to educate your child about the value of developing good borrowing habits.

Make sure your child knows the consequences of making late credit card payments. In addition to paying late fees of as much as $39, the interest rate on the card may jump. And explain the impact late payments have on your credit score. One late payment can shave your credit score by as much as 100 points. Get a copy of your own credit report and go over it with your child, showing how negative information is reported, and note that it may stay on your account for as long as seven years.

College students may find it hard to get worked up about how their credit scores affect their ability to borrow. After all, car loans and mortgages are years away. So make sure they understand that their credit score may also hurt their chances of getting a job after graduation. More companies are checking credit reports to get an idea about the stability and creditworthiness of job candidates. Encourage your child to resist the urge to open a bunch of new card accounts. The freebies offered are more than paid for by the fees and finances charges they'll eventually rack up. Besides, one credit card is really all any student needs. I'm Terri Cullen.