Credit Cards Online Information

A credit card can be a great way for a college student to learn about finances and build a good credit record early. But in the wrong hands, a credit card -- or worse, several -- can result in premature financial ruin. Local colleges and universities report they limit or forbid the presence of card issuers on campus, but issuers get around that by showering students with mail offers. Indeed, research shows this is the primary way young people get cards. In response to the growing temptation to "charge it," many schools are following a national trend of expanding their financial education beyond a brief speech at freshman orientation. This fall at Dillard University, for example, the financial aid department plans to offer a life skills class that will include lessons on smart spending such as how to select and use a card. The class is open to all students and consists of five one-hour classes that will also cover topics like paying back student loans. For the past couple of years at the University of New Orleans, a one-semester course called University Success has been part of its student retention program. UNO urges new students to take the one-credit course, says Charlotte Maheu, associate director of the program. Each class is small enough to encourage interaction. As often as possible, the class brings in guest speakers to offer testimony about the danger of credit cards. One female student recently spoke to the class about having to postpone graduation because of credit card debt. "She thought her parents were going to take care of (the debt) but they didn't." The 20-year-old student now works two part-time jobs and pared down school hours to part time. Finance professors tell students not to rely on cards for daily needs. "We tell them to avoid buying consumables on a card and to pay for those with cash," says Edgar Chase III, dean of Dillard's business division, who teaches several classes. Chase encourages financially fit students to get a credit card only after doing their homework. In a one-semester class called personal wealth and risk management, students do Internet searches to compare cards' interest rates as well as which banks offer the best (package) deals to students. Students study a textbook that covers wise choices in credit cards and read credit card-related articles from newspapers such as the Wall Street Journal. "My class emphasizes building wealth, and a great way to start doing that is to establish credit," says Chase. Banks agree. It's no secret card issuers view college students as fair game to be showered with offers from issuing banks as soon as they enroll. The onslaught typically continues throughout their academic career, picking up steam near graduation. Roy Baas, a personal finance professor at UNO, says university students get anywhere from three to 10 direct mail solicitations during the time they are in school. Some get many more. If a reckless student takes all the offers, eventually they can only make the minimum payment -- if that, Baas says. He holds a particularly dim view of credit card companies, calling them "loan sharks." Many have raised their interest rates, he says, to double-digit levels approaching 30% that make debt particularly hard to handle, especially when coupled with other debt like student loans. Some 44% of students have student loans that will take, on average, seven years to pay off, according to Student Monitor Inc., a market research firm in Ridgewood, N.J. Baas recently discussed with his students the drawbacks of making only minimum payments on cards: At a tame interest rate of 7.9%, a $1,500 debt would take eight years to pay off. At a 29.9% interest rate, it would take 30 years, he says, "longer than most mortgages -- and that's ridiculous." According to data from Student Monitor, 64% of students pay their balance in full each month. This is up from 58% the previous year. The average balance for students who do not pay in full each month is $531, says the data. Chase tells students to limit themselves to one card, and sign up for one with a low interest rate of about 9% to 13%. Cheryl Bragg, a local independent certified financial planner, says she would like to see more parental involvement and more card companies requiring parents to co-sign for the card "so the parent is paying attention to the debt as well." Still, she realizes that many college students get cards on their own. Indeed, Student Monitor research shows that only 10% of student cards have co-signers. Card companies, she says, often assume students will graduate, land well-paying jobs and be able to pay off their debts. The current job climate makes this far from certain. Bragg says before getting a card, students should make sure they'll be able to pay the bills and keep in mind caveats like late fees and related penalties, which can damage credit ratings. If the prospect of paying a credit card bill is too daunting, there's a simple answer, she says: "Don't get one." This might be easier said than done for many college students. While the banking industry acknowledges that people of all ages fall into credit card debt, it maintains that banks do not intentionally foist credit cards on people who are ill-prepared to handle them. "I would be a fool to sit here and say that people don't get into credit trouble, because they do, all the time," says Catherine Pulley, public relations manager with the American Bankers Association in Washington, D.C. "People assume that just because you're in college you're stupid, but in many cases the college students are more responsible than older cardholders." She adds that 90% of Americans pay their credit card bills on time. A person drowning in credit card debt is not likely to be able to partake of banks' most lucrative products, says Pulley, such as mortgages, CDs and mutual funds, "so it does a bank no good to offer a card to someone who can't afford it." Pulley says a "financial facts of life" talk between parent and child is crucial when a child is between eight and 10 years old. She also says that banks and banking organizations have been very active in providing education designed for young borrowers. Unfortunately, students aren't paying attention: 53% of students feel they did not get adequate credit education from the issuer of their first credit card, according to Student Monitor.