Students Beware
So it’s back to school time and that means the credit card issuers are clicking their heels in delight.
College students are one of the most highly sought-after demographics. There is a general belief that credit cards are good for them because of the ever-present threat of an emergency during college life, what with traveling and limited income. There is also a pressure to build credit history.
A Nellie Mae study a few years ago found that 78% of undergraduates ages 18 to 25 have at least one credit card. They carried an average balance of $2,748. Nellie Mae also found that of the 78% of undergraduates with a card; 32% have four or more cards; 13% have credit card debt between $3000-$7000; and 9% have credit card debt greater than $7,000.
Perks like a free t-shirt entice many college students to apply for cards they never would have considered previously.
It was not until two years after college graduation that I checked my credit report for the first time (I opened my first student card my sophomore year, so I thought). I was alarmed to see on my credit report a card I did not remember opening and had never, to my knowledge, possessed. Fortunately, the card had a zero balance and was promptly cancelled.
Then I remembered: Freshman year, outside the cafeteria door, those really cool t-shirts, everybody was doing it. I never even received the card, but there it was on my credit report! I sure did enjoy that t-shirt … I think I still have it today.
The point is, make sure your college student understands the ABC’s of credit before heading off to the university:
1) Debit cards can do all the same things as credit cards.
2) Don’t follow the lemmings! Shop and compare credit card offers to find the lowest interest rate and a decent credit limit. Too low, and it’s easy to max out. Too high, and you risk getting swallowed by debt.
3) Know how to read your bill. Be fully aware of late payment fees, cash advance fees and interest rate accrual and increases.
The average college graduate exits with over $20,000 in student loan debt. Help your college student use credit responsibly to avoid adding too much more debt to the pile.
