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