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Q: Before she leaves for college, should I give my child, who I trust, a debit card that is funded monthly, or a credit card with a limit that I pay off?


A: Short answer: It depends on your kid.


Long answer: The benefit of a debit card is that it's prefunded and there is very little risk of running up debt. When the funds are exhausted, the card gets declined. This forces college students to think twice before they swipe — remaining cognizant of their available funds.


A credit card is different for kids today, due to the 2009 Credit CARD Act. Now, anyone under 21 cannot get a credit card unless they can provide an independent source of income to pay their bills, or a parent must co-sign the application.


A credit card, on the other hand, can help your child establish a credit history of their own. And many credit cards have a bit more protection in case they are lost or stolen.


Whichever you choose, you must take time before they leave -- and periodically while they are away -- to review their spending and discuss the importance of keeping close track of their finances.


For some college kids, that piece of plastic is a bottomless pit. You need to reinforce that you will not keep filling it if they keep running out of money before the end of the month.


Remind them to:


  • Regularly check their account balance online;
  • Save 10-20% per month in case of unexpected expenses;
  • Not to share (or forget) the PIN for their account;
  • Live within their means!