The Easy Money of Student Credit Cards
Written by: barrywaters
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Date: Fri, 20 Feb 2009 |
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When I was an undergraduate student, you could walk through the student union on any given day and be handed a couple applications for student credit cards. Credit card companies would shower us with umbrellas, sweatshirts and free giveaways. On campuses, banks knew they had a marketing gold mine for student credit cards. It was so easy to get a credit card. Everyone I knew who applied for a credit card on campus had one in their hands within a week or two. Yet I knew plenty of people who only paid their minimum balances each month and kept ringing up additional purchases on their cards. You can see why it was an easy sell. It was like free money during a time when most of us had little. Ah, the freedom. Oh, the places we could go. The debts we could tally.
Many university administrations and state governments are now restricting solicitations for student credit cards on campuses. They have begun to realize that a lot of students are taking on the responsibility of a credit card before they have the knowledge and income to support it. Students are an easy target, after all. A fair number of them barely make ends meet, have student loans and are on their own for the first time. Give them a credit card and they may not know what they are getting themselves into. A U.S. PIRG study released last March surveyed college students and their credit card habits. Freshmen who were responsible for paying their own bills on student credit cards had an outstanding balance of around $1300; seniors, an average of over $2500. A late fee had been incurred by about 25 percent of those surveyed. Over 5 percent had their cards canceled, because of delinquency.
Banks who offer student credit cards claim they are doing so responsibly. They say having a credit card allows students an opportunity to budget and establish a relationship with a bank. Banks also cite studies that indicate that the use and abuse of student credit cards is not as bad as the U.S. PIRG study claims. According to those studies, the unpaid balance on student credit cards is an average under $500, and only 34 percent of students actually have a credit card in their name only. A lot of banks provide free budgeting workshops and financial planning seminars for students. They feel that student credit cards can be a responsible and invaluable resource.
College administrations want to continue to allow banks to market student credit cards. They just want to protect their students from any exploitive marketing practices. Student credit cards can be a great financial tool for students, if they are used responsibly and with full respect to what can happen if the bills are not paid.
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