Are co-signatory credit cards a good idea for students?

Co-signatory credit cards are credit cards that are offered by credit card providers so that people with a poor or incomplete credit score can get a credit card without the need to go to a specialist low credit score credit card provider who will charge higher interest rates and have very low credit limits.  

College students, particularly freshmen and sophomores, often tend to have trouble getting credit cards.  This is partly because they are so young and so do not have a chance to build up a credit record.  It is also the case that they are starting to build up student debts and have very low incomes.  Although there are some specialised cards that aim for students, they do not always have the best rates.

A co-signatory credit card works by having two people on the credit card, the main user and the guarantor.  Both the main user and the guarantor are responsible for paying back the credit card balance.  This can mean that if the main user defaults then the credit card company can then go to the guarantors and ask for the money back.

The element of a lower risk means that credit card companies are in a far safer position than they would be if the credit card were given to the student without any guarantee.

The co-signatory to the credit card has the right to have their own credit card with which they can charge the account (although this is rarely used) but they can also get a copy of the credit card statement sent to their address.  Most importantly of all they have to agree to any raising of the credit card limit.

Under the 2009 Credit Card Act there is now a requirement for any credit card that is extended to a student that is under 21 who can not show a full time income that they must have a co-signatory card.

Although there is no legal limit on who can be a co-signatory, the usual person who will act as a co-signatory on the card will be the parents of the student.  However, this does not need to be the case.

One of the reasons that many parents do not get a co-signatory card is that they are worried that it will create tension between the parent and a child.  However the only two alternatives – giving cash or having a single name credit card – are also likely to create tension.