Conventional thinking leads us to understand that school and college going children do not have any special usage of the credit card, other than downloading the latest chartbuster or purchasing an occasional gift item. However in practicality, children today have gone overboard to such an extent with credit card spending, that they have plunged themselves into credit card debt.

Once the child reaches the college, he is inundated with credit card offers galore. According to a 2001 Nellie Mae observation, it has been noticed that about 84 percent of undergraduate students have atleast have one credit card with an average balance of $2300. Close to 50 percent of students sign up for a credit card in their first year at college. Credit card companies are on a roll promoting students' credit card on campus and through the internet. Students are lured by fascinating offers, discounts to pubs and clubs, freebies, extra airline mines and low introductory rates.

The entire gamut of offers sounds and looks irresistible to your child and he can't help but reach out to a credit card. The ‘I will pay later' syndrome catches on the child and then he finds himself trapped in debt, if he cannot control his expenses. Some of the children end up as college drop outs because they have to work full-time to pay their credit card bills. Reality hits them hard when they know that their inability to pay affects their credit rating and subsequently their ability to afford a home, insurance and even get a job. It is sad to know that a person cannot get a job after his college just because he could not pay his credit card bills. The whole cycle takes a bad toll on the health of the child and affects his relationship with his parents and loved ones. It drives him into depression and at times he may even contemplate suicide. All of this can happen because of giving into a double edged temptation-overspending and mis-management of finance.

Before the depression of 1991, credit cards were not offered to college students. The cards were given to them only if they were co-signed by their parents. The credit limits were also less and manageable. However post 1991; the credit card issuing companies began to find a potential goldmine in the student market. They began to advertise and change their market strategy to suit the needs of children. They began to market on the ‘independent child' concept and began to show them how they can live and take care of their expenses without being a strain on their parents. The credit limits were raised and the co-signing procedure was removed.

When a child has reached an appropriate level of maturity and understanding of personal finances, co-signing a credit card can be very beneficial. Educate your child about how finance charges are applied on the account. Show him how the concept of minimum due works. Show him how he can devise a plan to pay the balance in full. Educate him about the inside story of reward cards and balance transfer cards. Let him know about the introductory rate of interest and how it can change once the promotional period is over. Inform him that cash advances have a higher interest rate compared to the purchases.

Children have to be educated properly about credit card spending. Credit cards are a good financial tool if utilized properly. In today's world financial knowledge is extremely important for everybody, not just adults. Any body that ignores the know-hows of financial tools is just hurting themselves. As parents, make sure that your child is educated in the field of credit card management. Children should be enrolled into a personal finance class. You can create a habit among your children to read financial newspapers and read online material as to how one can avoid credit card debt and take care of personal finance. When you buy a credit card for him, show him how he should compare the advantages and minus points before making a choice. Choose the one that has no annual fee and less credit limit.

Your child should be educated about things like penalties and fees for going over the limit and making a late payment. Make him aware about how the three major credit bureaus in the country work and make him known about the importance of the credit rating. Sit with him and review his personal expenses every month. Show him how if there is an outstanding balances on two credit cards or more, one should always pay the one which carries the highest rate first. Be a good credit card user yourself so that your good habits rub off on your child as well.