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Student credit cards and young credit

A credit card contract for parents, adult children

Summary

This downloadable contract between parents and their young adult children about credit card use can be a starting point for talk about co-signing for a credit card.

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Come February 2010, young adults may begin approaching their parents to co-sign for credit cards. A new federal credit card law will require people under 21 who want credit cards in their own names to get parents, guardians or other adults to co-sign the credit card application with them.

DOWNLOAD THE SAMPLE CONTRACT
You can download the sample credit card contract, spelling out the responsibilities of parents and their adult children, in these three formats:

Source: Dr. John E. Whitcomb’s “Capitate Your Kids.” Used with permission.

Dr. John E. Whitcomb, a medical doctor and author of the book, “Capitate Your Kids,” recommends parents get kids to sign credit card contracts with their co-signers.

Unlike credit card contracts you might receive from a credit card company, this is a simple agreement spelling out the do’s and don’ts of how the card is used and what is expected of the young adult.

The credit card contract highlights:

  • The need to pay off the credit card bill every month.
  • Agreeing with parents what can and can’t be purchased with the credit card.
  • Establishing a maximum amount to spend each month without getting parental consent.
  • Setting up arrangements for young adults to repay parents (with interest) if the cardholder cannot pay off the entire balance each month.

Whitcomb says misuse of credit cards can lead a young adult to what he called “financial slavery.”

He advocates financial education about responsible credit card use. He adds: “Credit cards are the modern form of putting people into a long-term financial obligation and putting them in a terrible situation.”

See related:Credit card reform and you, Law may force parents, young adult children to talk about credit cards, Law alters cozy relationship between colleges, credit card issuers, A comprehensive guide to the Credit CARD Act of 2009

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