Students and the credit card binge

For many college students, credit cards are an intimidating yet attractive idea. Having a credit card in one’s name can symbolize the entrance into adulthood.

“It has become a rite of passage for every college freshman to get his or her first credit card,” said Judith Stevens, education specialist at Consumer Credit Counseling of Denver in a brochure entitled “The Credit Card Push on Campus.”

Students have it easy to apply for cards: Representatives for credit card companies come to college campuses ready to prey upon students who are “fresh blood in a tired market,” the brochure stated.

“(Credit card company representatives) give out the lines of credit so easily,” said Dorothy, a customer service representative for Target credit card accounts whose last name was not given. “If (students) open up any, maybe one would be fine. But they just open up many and get in over their head. Over the last 30 years, there’s been so much pushing to have so many lines of credit. The credit bureau says it’s a detriment to have more than two lines of credit.”

Dorothy said it’s important to read the fine print brochure that comes along with the credit card.

“(Representatives) may say (they have) a 0 percent interest rate, but what is it going to increase to?” she said.

If the fine print in credit cards is intimidating or difficult to understand, Dorothy said students should call the customer service representative at their credit card company and ask questions.

“Say ‘I’m new to this, what are the rules to this game?'” she said. “Most customer service representatives are willing to talk to you.”

After using their credit card for the first time, students may not be aware of the importance of getting the payment in on time.

“Once you’ve charged (your account) and gotten your billing statement, make sure the payment is paid on or before the due date,” Dorothy said. “If you know the payment may be late, see if that credit card can extend your due date so your payment won’t show up late.

“Because students move a lot, when they move they need to call their credit card and change the address so the billing statements keep up with them (so there will be)…less chance of a missed statement.”

To remember to pay their bills on time, Dorothy suggested, “while students are getting used to creating budgets, make a budgeting diary and write down when things are due so they don’t forget their bills. It’s just learning that whole thing of money responsibility.”

For some students, having a credit card can bring stressful situations to the forefront.

“Credit cards are bad, they get you into trouble,” said Nicole Larson, an education major who had her credit card stolen when someone took a purse out of her car.

“Don’t leave your credit card in your car,” Larson said. “And if you do, make sure the doors are locked.

“I originally thought I lost my purse,” Larson said. “So I didn’t report (my credit card) stolen until a few days later. When I checked my account online, I saw that someone had been spending money at Wal-Mart on my behalf when I hadn’t gone to Wal-Mart. The charges had been in excess of $300.”

Steven, a customer service representative for Capital One whose last name was not given, said that when a card is stolen, “(customers) need to give a call to the credit card company. What Capital One does is that we review your account. We will see if there are any unauthorized charges. We will restrict the account and transfer the account into a new account number. In two weeks, we issue the customer a new credit card.”

To keep their credit scores in tact, Steven said credit card holders should “at least make the minimum payments.”

According to the Federal Trade Commission Web site, , “Credit scoring is a system creditors use to help determine whether to give you credit.”

A credit score is calculated by compiling “information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt and the age of your accounts is collected from your credit application and your credit report,” according to the Web site.

“Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points a credit score helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.”

“Forty-five percent of college students are in credit card debt, with an average balance of $3,066,” said Tom Gallagher, head of the Florida Department of Financial Services, in an article in the Bradenton Herald last year. “Undergraduate students carry an average of three credit cards.”

In response to the growing debt of students and adults alike, Gallagher began the Web site to educate Floridians on how to manage their finances.

The site contains an article called “Eight Scary Little Credit Card Secrets,” featuring facts about such topics as minimum payment requirements, penalty interest rates and cash advances.

Some believe that to avoid credit- card debt, it is as simple as only spending money one actually has.

“A wealthy man spends a penny less than he earns and a poor man spends a penny more. There is nothing much to say about credit-card debt,” said Philip Porter, professor of economics and director of the Center for Economic Policy Analysis at USF. “You avoid it by living within your means. The one thing to know is how interest compounds. Debt on a credit card applying 18 percent interest will double in the four years it takes to complete a college education. On the other hand, if you saved a penny every day of your life you’d be a millionaire when you retired at age 65.”