Examining The Trends of Student Credit Card Use | CreditShout

Examining The Trends of Student Credit Card Use

By Dan Rafter / November 9, 2010

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Do you have sons or daughters heading off to college next year? Maybe your children are already studying in some dorm room hundreds of miles away.

You’ve undoubtedly talked to them about the steps they need to take to stay safe. You’ve probably given them a few lectures about alcohol and drug use. You may even have advised them to be careful when it comes to the complicated world of romantic relationships.

But what have your told your college-aged children about credit cards and debt? If the answer is “nothing,” then you’ve done them a disservice.

New Freedoms, Bad Choices

When students arrive at college campuses, usually free from direct parental oversight for the first time in years, their natural instinct is often to push the limits of their new freedom. When it comes to finances, this often means that college students rack up large amounts of credit card debt.

Young adults are saddled with enough debt from student loans when they graduate with a four-year degree — some studies peg the average amount of student-loan debt that college grads carry at more than $20,000. Adding credit card debt on top of this just adds to the financial challenges that graduates will face as they enter the working world.

And let’s be honest: Students who graduate now are entering a hiring market that’s abysmal. The national unemployment rate has been above 9 percent for longer than a year. Many students, overwhelmed with a combination of credit card and student loan debt, will struggle to find decent-paying jobs. It’s far from an ideal situation.

College Students Racking up Credit Card Debt

And don’t count on college students to regulate their own spending. According to a study from FinAid.com, the total outstanding credit card debt of U.S. college students is now more than $820 billion.

Earlier this yer, the Huffington Post reported that a growing number of students — more than one-third — are using credit cards to pay for at least part of their tuition costs. According to the Post’s report, college graduates with at least one credit card left their schools not only with a bachelor’s degree, but with an average of $4,138 in credit card debt in 2008. That figure is up a whopping 44 percent from 2004. The Post story said that college students are getting an early start on accumulating debt: The typical freshman college student had racked up credit card debt of $2,038 in 2008, an increase of 27 percent from four years earlier.

There is some relief, though. In 2009, the federal government approved its massive Credit CARD Act. This act imposed new regulations on the way credit card companies operate. Many of these regulations govern how these companies can operate on college campuses. You won’t see Visa, MasterCard or Discover manning tables in student unions any longer and passing out free t-shirts as a way to lure young students into the world of credit card debt.

The Credit CARD Act also makes it more difficult for those under the age of 21 to qualify for credit cards. Consumers who haven’t yet turned 21 will need to get a co-signer, usually a parent, to apply for a card.

As a parent, though, you can’t rely on the government to protect your children from credit card debt. It’s your job to explain to your children how easy it is to fall into mounds of credit card debt, and how difficult it is to get out from under it.

If you teach this lesson well, you’ll increase the odds that your sons or daughters won’t leave college with the weight of sky-high credit card debt on their backs.

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