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Student should study these credits

Updated: May 3, 2013 12:14PM

Originally published: August 7, 2001

If you’re sending a teenager off to college, you can be sure he or she will face multiple temptations--not just the traditional issues of drinking, drugs and sex--but another modern demon: credit cards.

There’s nothing inherently evil in credit, but students faced with sudden financial freedom and a lack of credit education are likely to run up big debts.

Although card issuers have become more moderate in their marketing approach, they still target college students as good credit risks. Students are likely to graduate with jobs that pay well, and while they’re in school the card issuers expect that parents will make good on any spending abuses.

So along with books and supplies, students are likely to pick up credit card applications.

Now, both Visa and MasterCard are going a step further in creating credit card products that are designed to educate students about debt as well as give them a limited freedom and responsibility to build a good credit record. Parents who want their children to have the financial safety of a credit card can still control their spending.

This week Visa unveiled a new product called Visa Buxx--a “parent-controlled, re-loadable payment card.”

The card looks and works like a typical Visa card, and is accepted at any Visa location or any ATM bearing the Visa logo. But this card is actually more similar to a prepaid telephone card. That is, the parents set up a transaction account and deposit a limited amount of funds. When the card is used, funds are drawn from the amount deposited.

Parents can reload the card by making additional deposits, either by telephone or through online access. That feature makes this card different from traditional credit or debit cards. By checking in either at the Web site,, or by calling a toll-free number, parents can constantly monitor how their student is spending money by viewing current or past account statements. They’ll be able to get complete and current details on all purchases.

Cards will be issued by participating banks, and there will be four issuers at the Web site in coming days. Each has promised to charge a very low annual fee, expected to be about $15. Parents apply for the Visa Buxx card at the Web site. They will receive a welcome kit, including a financial skills literacy test that will help guide discussions about money management and responsibility.

The MasterCard entry in this back-to-school responsible credit card environment is a joint venture with College Parents of America--a membership group dedicated to “helping parents prepare for and put kids through college easily, safely and economically.”

This group offers advice, discounts on products such as computers, information on study abroad programs and a wide variety of helpful information at its site,

It works like the VisaBuxx card: parents can reload the card with money at any time, either by phone or Internet. The students’ spending debits the account immediately, up to the amount of the prepaid deposit. Parents and students can track spending and the remaining balance on the Internet.

The College Parents debit card costs $7.95 for the initial order, plus $3 for each money reload to the same card. There is a 75-cent charge for each ATM cash withdrawal, plus any ATM fee charged by the host bank.

The package comes with a booklet designed to teach wise use of credit and money management skills. To get more information or to order the debit card, call (877) 816-4221.

Money management should be a required course, but most schools avoid it. So if parents don’t teach this subject, more young people will have to learn the hard way.

And that’s The Savage Truth.

Terry Savage is a registered investment adviser for stocks and commodities and is on the board of directors of McDonald’s Corp. and Pennzoil-Quaker State Co. Send questions via e-mail at Her third book, The Savage Truth on Money, recently was published by John Wiley & Sons Inc.

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