Large print giveth, but small print taketh away.
Free T-shirts, CDs and vast quantities of easily accessible money are an enticing lure for any college student, and credit card companies are more than happy to accommodate them.
Simply by signing an application, a growing percentage of college students across the nation are walking away with a T-shirt, and in many cases, the prelude to spiraling into a financial sinkhole of debt.
As a cash-strapped freshman at The University of Memphis, Charles Vance jumped at the opportunity to get a credit card.
“I thought it would be helpful in case there was an emergency and I needed some fast cash,” Vance said.
Less than two years later, Vance, 24, had amassed nearly $10,000 in debt, and has been forced to seek legal council in consolidating his bills to avoid filing for bankruptcy.
“I started out by just purchasing a pizza here and there with the card, but I steadily began using it more often simply because it was easy and it allowed me to do things I usually could not do,” Vance said.
Vance acquired four credit cards during his first two years of college, plus a quick lesson in the intricacies of economic failure.
While Vance’s story could send shudders through the most hardened of financial experts, his dilemma is becoming shockingly commonplace for college students.
Does this story sound familiar? It may, considering that credit card companies set up shop at any university or college they can get an account with.
80 percent of colleges and universities allow credit card solicitation on campus, according to the Consolidate Credit Counseling Services, Inc. The teasers about low interest rates or free gifts often appeal to students.
Universities do not just allow credit solicitors on campus for free. Banks pay nearly $1 billion a year to 250 of the largest universities in America just for marketing rights, according to Robert Manning, author of “Credit Card Nation.”
One of the problems with soliciting applications on campuses is that students can sign up for a card without their parents’ permission if they are over 18.
Also, a study conducted by the Nellie Mae Foundation, the leading national provider of higher education loans, shows that Americans are loyal to their first credit card, keeping it for an average of 15 years.
Tim Swift, a U of M senior, has never owned a credit card and does not plan on getting one for a while. He does own a check card, which allows him to charge only as much money as he has in his checking account. He plans to be debt-free for as long as he can.
“Let’s be serious,” Swift said. “Money-wise, I am not mature. If I need to buy something and I don’t have the cash on hand or in the bank, I won’t buy anything. I’m not ready for a credit card.”
Unfortunately, some college students do not have such strict personal regulations when it comes to swiping cards through the readers.
Of the 78 percent of college students who have credit cards, 32 percent carry four or more cards, which is up from 27 percent, according to a survey conducted in December 2000 by the Nellie Mae Foundation. Graduate students are affected the most. The survey showed that 95 percent of these students owe an average of $4,776, while 6 percent owe more than $15,000.
Other students are more conservative when handling credit.
Daniel O’Brien, a U of M junior, got his first credit card when he was 21. According to O’Brien, he waited until he thought he was mature enough to get a credit card.
“Credit cards can be valuable if you know how to use them,” O’Brien said.
Mike Davis, educational director for Consumer Credit Counseling Services, gave an example regarding credit payments. If a consumer has a “maxed out” credit card with a limit of $1,500 and an interest rate of 18 percent, it will take the consumer 16 years to pay off that card if he or she is only making minimum payments every month.
For those students who have found themselves in credit trouble, Davis has a few pointers. First, stop charging. Cut up all the cards you may have. Make a list of all the creditors and call them. Ask if there is a way you can make an alternate payment plan if you find yourself delinquent on payments.
Not many college students know that there are counseling services for consumers.
“The only young people we see are between the ages of 24-28,” Davis said.
Despite all the criticism surrounding college students and credit cards, Jim Donahue, a spokesman for MBNA Credit Services, said that statistics show college students are more reliable than their parents when it comes to paying off their credit cards.
