|
Student
Credit Card Debt: A Survival Guide for Students By
Amy Cooper-Arnold College
is the last care free step before real life begins, or at least it should be.
Students should be able to go to sleep each night with the only pressing responsibility
being the English exam tomorrow morning. They should still get to live in a world
where although they can’t afford much more than the occasional late night drive
through Taco Bell or downloading the latest hit single, at least they aren’t worrying
yet about paying a mortgage, most forms of insurance, utility bills, or the college
loan that is allowing them to get an education. Unfortunately,
for many college students this is not the case. Many are already burdened with
financial pressure because they are accruing credit card debt, in some cases over
$7,000 worth of it. Increasingly, students are even coming to campus with credit
card debt in hand. Consolidated Credit Counseling Services Inc. reports that 20%
of freshman got their credit card in high school and nearly 40% sign up for one
in their first year at college. With the abundance of on-campus, mail and Internet
card offers giving low introductory rates, freebies, and bonus airline miles,
it’s not surprising to find that according to a 2001 Nellie Mae study 83% of all
undergraduate students have at least one credit card and carry an average balance
of $2,327. The
problem of high credit card debt has many implications for a student. Some end
up dropping out of college all together so they can work full-time just to pay
credit card bills. If they are able to stay in school, but have in the process
ruined their credit rating, it can affect their ability to rent an apartment,
afford insurance and even get the job that will help them to pay off their debt.
Even relationships suffer as a result of financial stress. There is also a psychological
affect on students. The stress can lead students into depression, and in a few
cases has been a contributing factor to suicide. Of
course it hasn’t always been like this. According to Dr. Robert D. Manning, Professor
at Rochester Institute of Technology and author of Credit Card Nation, in the
late 1980s student credit card limits were around $300-$500 and parents were required
to co-sign. But when credit card companies began making a lot of money during
the 1991 economic recession, they started looking for new markets and found it
in the student population. Issuers dropped the co-signing requirement and started
raising limits, which, when combined with parents’ increasing financial pressures
and higher costs of education, gave students a way to fund themselves through
college. And
students are an easy market to tap into. In his article “Credit Cards on Campus,”
Manning writes, “Credit card companies encourage fantasies of easy money because
students are so profitable: teens have financial naiveté, high material expectations,
and responsiveness to relatively low-cost marketing campaigns, high potential
earnings, and future demand for financial services.” Credit
companies advertising to the vulnerabilities of young students is not the only
factor that goes into the current trend. Most students simply have not received
the education in personal finances and credit card management that they need to
meet the onslaught of offers. According to Consolidated Credit Counseling Services,
Inc only 15% of high school students take a personal finance class. And, according
to the Jump$tart Coalition for Personal Financial Literacy, a non-profit organization
which promotes financial literacy at the K-12 level, parents for a variety of
reasons are not talking to their children about the privilege and responsibility
that goes along with using a credit card. Dr.
Carol Carolan, Executive Director and Founder of the Center for Student Credit
Card Education, says that the single best thing parents can do to help their children
avoid the pitfalls of credit card debt is educate them. Parents need to talk to
their children about it early on and regularly. Dr. Carolan suggests the following
tips for parents. - When
a child has reached an appropriate level of maturity and understanding of personal
finances, co-signing a credit card can be very beneficial.
- Get
a credit card with a low limit and no annual fees (visit the "Card Reports" section
of our website to comparison shop for student credit cards).
- Discuss
with your child the details of the credit card including interest rate on purchases
and cash advances. Review all the expenses every month.
- Show
your child what finance charges might apply if the balance is not paid in full
and on time. This includes any interest, fees, and penalties
- Be
a good role model.
Experts
don’t all agree on the appropriate age for a first credit card. Dr. Manning, for
instance, argues in his article Credit Cards on Campus that having them at an
earlier age may actually result in fewer debt problems later on.” Other experts
argue that waiting until the junior or senior year in college is best. The bottom
line parents need to realize is that once students reach the college campus, they
will be inundated with credit card offers and will be able to get a card regardless
if they are supported financially solely by their parents. And
talking with students involves more than mere calculations of fees, interest rates,
and balances. Students need to understand the messages they receive through advertising,
the difference between a want and a need, as well as the lure of money. Give students
a healthy, realistic perspective of money and material possessions and they will
be better equipped to make wise decisions. Universities
and colleges play a huge role in the current trend of high student credit card
debt. Some invite credit card issuers onto campus because they receive revenue
as well. But others are starting to recognize the problem and are restricting
the activities of credit card companies on campuses. Manning states in his book
Credit Card Nation, that “During the academic year 1999-2000, over 400 colleges
and universities formulated official policies against on-campus credit card marketing
and nearly 600 other schools are considering similar restrictions.” Some
institutions like Rochester Institute of Technology (RIT) and the University of
Central (UCA) Arkansas are even beginning to require classes in personal and consumer
finances. Mary Ann Campbell, CFP, professor of personal finance at UCA and professional
speaker with Money Magic, Inc., has a mission to educate students, educators,
and adults about money. She is currently working on her dissertation about college
students and credit card debt. Campbell is researching the best methods of reaching
college students through a high impact presentation warning them of the perils
and privileges of plastic. Like other experts, Campbell is not against students
having credit cards. In fact, she says it is easier to get one as a student and
can help them build the good credit history needed after graduation. But students
do need to be educated. Campbell gives the following tips and reminders for students.
- There
is true magic to compound interest when it’s working for you (as in an investment
or savings account), but true devastation when it’s working against you (as in
credit card debt). Even when you buy something on sale, the interest alone can
double the price.
- Account
for everything. Keep records of each credit card including the interest rates,
fees, balances, due dates and purchases. Campbell suggests a good way to do this
is to setup a spreadsheet in Excel. This will also keep you organized so you don’t
miss another payment.
- The
only way to get out of debt is to stop charging and always pay more than the minimum.
If more than one credit card has an outstanding balance, then begin paying off
the one with the highest interest rate first, then go to the next highest interest
card, and so on.
- If
in trouble, talk about it with someone you trust and respect. This could be a
parent, teacher, or friend. Hiding it doesn’t make it go away.
- Credit
scores can make all the difference in the world for good or bad. It can take many
years to recover from a bad credit score.
- Learning
to use credit cards responsibly is a gift. Seek to gain knowledge and wisdom.
Credit is a privilege and it is the student’s personal responsibility not to let
it become a peril. Campbell says, “The magic comes from you.”
- While
in college, students need to think outside the box, but live financially within
the box.
Credit
cards can be an invaluable tool for a student. While providing security and convenience,
if used wisely a student will build the good credit rating that is needed to secure
other consumer loans, jobs, and lower insurance rates after graduation. Dwayne
Blew, a member of CreditBoards, a forum dedicated to credit issues, is one example
of a student who didn’t buy things he didn’t need and paid his credit card balance
in full each month during college. Now he is reaping the benefits of a good credit
score. Dwayne says, “One of the reasons you’re going to college is to improve
your lifestyle once you graduate. After putting so much effort into school, why
let something small like a credit card end up ruining it all?” Many
excellent resources exist to help students both avoid and get out of the credit
card debt trap. - Comparing
credit cards is an important step in finding the best one to suit your needs.
CardRatings.com makes this search simple and easy by allowing you to research
the best rated student credit cards.
- Consider
utilizing the services of a nonprofit credit counseling service. Be very careful
when considering a credit counseling service, though, as many counseling services
are scams, including nonprofit services.
- Consolidated
Credit Counseling Services, Inc. has a free, downloadable Budgeting Guide for
students.
- Dr.
Carolan has written a booklet titled The ABCs of Credit Card Finance – Essential
Facts for Students that can be ordered online and it will be mailed to individuals
free of charge.
- Message
boards or forums are a great source of information. You can post questions, concerns,
or comments and a real person will respond with real life information. Campbell
says they are a gift and can even become a support group. You can join the CardRatings.com
Message Board for free.
- Even
if your school doesn’t require a personal finance class, take one if it’s offered.
- http://www.debtsmart.com/,
created by Scott Bilker, author of the best-selling books Talk Your Way Out of
Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card
and Debt Smart, contains several tools to help consumers deal with credit card
debt.
The
financial decisions students make in college have a long lasting impact on their
future. They are learning how to use and manage various financial tools vital
for life in the “real world”. When used wisely, credit cards are one tool that
can open the doors for a life unencumbered by financial burdens. Amy
L. Cooper-Arnold has been a staff writer for http://www.cardratings.com/
since 2004. Her articles have been republished by respected publications throughout
the country, including Young Money Magazine, E/The Environmental Magazine and
About.com. Amy recently graduated with honors from Austin Peay Univ. and is currently
taking graduate-level classes Article
Source: http://EzineArticles.com/?expert=Amy_Cooper-Arnold
The
information supplied on this page is by a third party and jml Property Services
do not take any responsibility to its accuracy ©jmlpropertyservices01/06
Going
to University? Take a look at this NatWest Press Release - NatWest Student Living
Index 2008 Details
Here
Students
with more than £3,500 worth of belongings - Blog Sep 09....More
Here
(see
also Credit Scoring & Credit References)
Back
to Insurance Articles 
Looking
for Car Insurance for Students? Click on logo 
________________________________ 
Looking
for Students Tenants Insurance ? Click on the Homelet logo below and get an immediate
competitive quote on line from one of the UK's biggest rental property insurance
specialists. 
(Student
motor) Up
to 30% off motor insurance for students It's
highly likely that you're paying over the odds for your motor insurance. It's
a fact that students often pay up to 30% too much - that could be an extra £200
that we could put in your pocket. So go on, challenge them! As
the only insurance provider recommended by the NUS, Endsleigh have a unique experience
of insuring young people's cars, motorbikes and scooters. Because of their independence
and size, they can negotiate extensive cover for you, at competitive prices. They
can also provide you with roadside assistance, windscreen cover and the option
of spreading the cost of your premiums over 12 months. So
what have you got to lose! 
 
___________________________________________________________ 
|
