Credit cards: big debt on campus
They're young, they're keen to assert
their independence, and they are being offered credit cards wherever
It's become a college rite of passage.
Even before this year's freshman class settles into their dorm
rooms, the credit card offers will be rolling in. Fifty-four percent
of freshman students carry a credit card. By sophomore year, the
number rises to a whopping 92 percent. And 47 percent of college
students have four or more credit cards, according to a 2001 study
by Nellie Mae, a national provider of higher education loans.
No income? No problem
It is so easy for college students to qualify for a credit card
because credit card issuers realize that parents can be counted
on to bail out students who run up oversized balances or fall behind
And credit card issuers want college students as customers because
students tend to be loyal to their first credit card, and they'll
keep on charging long after graduation.
Credit card issuers used to require parental approval before issuing
a card to students who had no independent income source, but they
abandoned that hands-off strategy in the '90s.
Colleges are raking in the dough
Instead, the card issuers aggressively went after the student market.
They allied themselves with college campuses with exclusive marketing
agreements. According to Robert Manning, author of the book "Credit
Card Nation," those deals now yield the nation's 300
largest universities nearly $1 billion a year.
Used well, credit cards can play an important role for college
students. They teach financial responsibility and ease the way into
the postgraduate financial world.
But credit cards can also leave financial bruises that don't heal
until long after the diploma has yellowed on the wall.
It doesn't come easy
Too often, students learn about the high cost of credit cards the
hard way: after they run up balances. It's a problem that's getting
worse, according to Nellie Mae's research.
Twenty-one percent of undergraduates who have cards have high-level
balances between $3,000 and $7,000; a 61 percent increase over the
2000 population. Between the time they arrive on campus and graduation,
students double their average credit card debt and triple the number
of cards in their wallet.
Check out this syllabus
full of answers for students and parents on the unique features
and traps of credit cards targeted to students.