Credit Cards Online Information

Credit card debt is a burgeoning problem on campuses. Although most students handle credit well, a significant minority get into debt. Causes include beliefs about future earnings, debt attitudes and financial knowledge. Many students have not had financial training and, among those who have, classes do not necessarily cause behavioral changes. Colleges, parents, and public policy makers must work together to combat the problem of student consumer debt. Suggestions are made for college policy with respect to credit card solicitation.

"I've called several attorneys and my question is how can they charge so much for bankruptcy when you already don't have any money? How much do you charge?"

These are questions you might expect to hear in a bankruptcy attorney's office. Instead, the inquiries were from a young woman at a seminar on managing credit card debt led by a local attorney given on our college campus.

Credit cards have become a fact of life on college campuses. With a reported $13 billion in discretionary income, college students represent a huge market for credit card companies (Kara, Kaynak, & Kucukemiroglu, 1994). Students often receive incentives, such as t-shirts or mugs, to apply for cards, and requirements, such as previous credit history, are often waived (Kara et al, 1994). Due in large part to these marketing efforts, a recent study reported that approximately 70 percent of college students possess at least one credit card--a number much higher than previously thought (Manning, 1999), while another study reported that 93 percent of college seniors have acquired at least one card (Markovich & DeVaney, 1997).

Colleges, too, have embraced the idea of credit cards among their students. According to one study, 77 percent of colleges reported accepting credit cards for payment of tuition (National Association of College and University Business Officers, 1995). Further, many colleges allow companies to solicit students and alumni with imprint cards, cards personalized with the institution's logo. Colleges then receive money, either in a lump sum, an amount for each completed application, or, in some cases, a percent of the amount charged by those possessing the cards. Credit card companies often are allowed to seek business on campus. For example, at some institutions, student groups may sponsor credit card companies who wish to solicit applications. Both sides appear to benefit from this arrangement. The student group receives a set dollar amount for each application received, and the company is able to set up a table one day a week in the student union.

Most Students Manage Credit Well

For most students, this easy access to credit is not an issue. Studies indicate that most students manage credit wisely. The 1998 TERI (The Education Resources Institute) Credit Risk or Credit Worthy study reported that 59 percent of students pay off their credit cards monthly. Others have estimated that only one in ten students is irresponsible with credit card use (Stanford, 1999). Indeed, the TERI study reported that most students report using and having credit cards in order to build a credit history and for use in emergencies. The study further reported that 82 percent of students with credit cards had balances of $1000 or less.

Credit Card Debt is a Problem for Many

However, despite the fact that the majority of students do well managing their finances, a significant portion do not. Manning (1999) reported an average credit card debt of $2,226 while Norvilitis, Szablicki, and Wilson (in press) found an average debt of $1,518 among all students. The consequences can be serious. There have been at least two cases widely reported in the media of college students who took their lives in part because of their credit card debt. Sean Moyer was a 22-year-old student with $10,000 of debt and Mitzi Pool was a 19-year-old student with $2,500 in debt. In both cases, they had talked to others about feeling overwhelmed by the debt shortly before their deaths. Anecdotally, on this campus, many students at academic probation hearings report having to hold several jobs to service the debt they have already accrued. For other students, the result can be bankruptcy or starting a career already heavily burdened by debt. It is not surprising, then, that students with high levels of debt, likely realizing the severity and chronicity of their situations, report both daily financial stress and decreased psychological well-being. Further, high levels of debt are related to a decreased sense of one's ability to manage and comprehend one's financial situation (Lange & Byrd, 1998).

The situation may be worse for those who get their credit cards on campus. The Public Interest Research Group's (PIRG) Student Credit Card Trap study (1998) found that students who received cards from campus tables had higher unpaid balances than students who received their cards from elsewhere and were also more likely to carry a balance from one month to the next. Norvilitis and colleagues (in press) found a similar pattern that suggested that students who receive cards from tables in the student union have larger debt to income ratios than students whose cards are from another source.

# posted by Medical Information : 2:46 AM