Posted: 6/23/2008 5:35:10 AM EDT
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www.zwire.com/site/index.cfm?newsid=19793609&BRD=2287&PAG=461&dept_id=512588&rfi=8 The sky's the limit as college kids dive into debt The skydiving calendar and poster on Tyler Mathews' office wall are small indicators of an expensive habit that has landed him in a $1,200 pile of credit card bills. "I try to be really careful with my money," said Mathews, a 22-year-old accounting senior at Lamar University. "I try not to get myself in too deep. I'd like to say I'm financially smart." Mathews is among a growing number of college students graduating with credit card debt. Most students graduate with close to $4,000 in credit card debt, according to Truth About Credit, a campaign aimed at stopping credit card companies' visits to college campuses. That number does not include student loan debt. "Students are inundated with credit card applications," said Brad Brown, a certified public accountant with Edgar, Kiker and Cross, CPAs, in Beaumont. "They suck them in with low rates. But unless we expect to pay the card off in the next six months, we shouldn't be hooked in by the attractive rate." Students tend to exploit credit card offers because they see credit cards as attractive alternatives to using cash or phoning home for money, Brown said. "Credit cards these days are used throughout our society," Brown said. "It's typical of the way we're raising our children. They see what they want, and with a credit card, they don't have a barrier to getting it." Also, most college students think they need a credit card to establish credit. Open a savings or checking account. Be sure to follow the bank's rules, and be sure not to overdraw your account. This shows that you have money and can handle it responsibly. Put your apartment and utilities in your name. Recurring bills, such as rent, utilities and car insurance payments, paid in a timely manner, can indicate that you are a good credit risk. Keep copies of the bills and your canceled checks. You can ask your landlord, utility company or insurance agent to write letters on your behalf stating you have consistently paid your bills on time. Apply for a secured credit card. With this kind of card, if you deposit $1,000, your credit limit will be $1,000. This is not a good financial deal, but it is a viable way to establish credit. Consider applying for a department store or gas credit card. They usually carry low credit lines and are easier to obtain. Be sure to ask if the lender reports repayment information to a recognized credit-reporting agency. If it doesn't, your efforts to establish credit might be wasted. Source: Texas Society of Certified Public Accountants But Brown said many students don't realize that there are ways to establish credit without owning a credit card. The easiest way is to put their name, as opposed to their parents' name, on the apartment or house lease while in school, Brown said. Students also should put their names on utility bills. That allows the student to establish a regular payment history under his or her name and Social Security number, Brown said. Aside from building credit without a credit card, Brown said there's perhaps an even better reason to avoid plastic. "Why have a credit card when you have no way to repay?" he said. "A credit card will become an everyday part of their life once students graduate and have a means to pay it back." Easy targets College students receive about five mail solicitations and four phone solicitations for credit cards every month, according to a U.S. Public Interest Research Group survey. "I get tons of them, but I rip them all up," said Tina Waller, a 24-year-old Lamar Institute of Technology student. But an offer she received recently was too good to pass up. With her GM Flexible Earnings MasterCard, 3 percent of every purchase she makes gets put toward a GM vehicle. It came at a perfect time for her because she said her old car died three weeks ago. Waller said she transferred balances from her Capital One and Chase credit cards to her new MasterCard and is working at LIT to pay off her $2,000 debt. The debt comes from necessities - mostly groceries and gasoline - although she admits to occasionally charging a Little Bear or Backyardigans movie for her 4-year-old son, Preston. "I really don't buy many unnecessary things," the Bevil Oaks resident said. Common debt Even with credit cards out of the picture, it's not uncommon for college graduates to enter the working world with a hefty amount of debt under their belts. The National Center for Education Statistics estimated that 50 percent of college students graduate with an average of $10,000 in student loan debt. "It's not unusual for a student to have loan debt once they graduate," Brown said. "But why compound that with credit card debt?" Loan debt won't affect students' credit ratings until they begin repayment, Brown said. He added that the debt won't negatively affect their credit rating unless they miss a payment. After graduation It is common for employers to conduct background checks on potential employees, and Brown said credit checks increasingly are becoming part of that routine. Credit checks don't worry Mathews or Waller because both said they have decent credit scores and will do what they can to ensure they stay that way. Mathews said his debt is a combination of the cost of his nine hours of summer classes at Lamar and of the more than $5,000 he spent to get his skydiving license and equipment. He said most of it is paid off, and the $1,200 that's left is on a card with a 0 percent interest rate for one year. He transferred that balance from another credit card that offered a 0 percent interest rate for one year. And so far, he said that hasn't affected his credit score. Mathews said if his debt isn't paid off by the time the interest rate on his credit card kicks in next June, he'll find another card with no interest rate and transfer the balance. Waller will graduate from LIT in December as a process operator. A financial aid program through school pays her tuition, so she said she will not have any student loan debt when she's finished. A U.S. Public Interest Research Group survey showed that 76 percent of students who owned credit cards got the card by stopping at a table on or near campus. That's not the case at Lamar University, where the assistant vice president for student affairs, Jason Lambert, said he hasn't spotted credit card tables on campus in his four years at the school. "It's something we don't encourage," he said. "We don't want our students in debt." ----------------------------------------------------------------------- He would "like to say" that he is financially smart, but he isn't. What goes through a person's mind to cause them to imagine doing something like this is "financially smart"? |
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They are betting that they can float the debt for now, and have the funds to pay it off in the future. Some will, some won't... Somehow, me-thinks this will end up being a result of corporations sticking it to the little guy. Obama to the rescue! This is nothing new, I remember people doing this almost 20 years ago. |
You are, of course, correct. But what gets me is their desire to declare such behavior as "financially smart", as if they are such wise money managers.  |
There's no deception like self-deception. 
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I do not doubt that use of credit cards is up. But the real reason is not high gas and food prices. It is the subject of this song. I Want It All No self restraint. No maturity. No long-range planning. No patience. |
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Avioding credit card debt is a lot easier said then done. My favorite was a family friend who gave my wife all sorts of crap for having student loans in college.....he couldnt understand why we didnt just pay them off.....we were like, sorry we dont make 250k/year like you do.....
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And he's spewing this on the internet. Yep, kid's a genius. Actually, he probably has a bright future with the CBO. They aren't averse to red ink. |
He probably meant the 0 interest cards he had found. Still, it's a wad of money out of pocket that he could have saved.  I shudder to think what the monthly "finance charge" is on a 20K CC balance.
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+1 It's the convenience of it. You don't have to carry a bunch of cash, it's quick and easy at the grocery store, etc, and you get a handy statement at the end of the month that quantifies what you spent and where... very helpful for retrospective examination of ones spending habits, and subsequent budgeting. Just pay it off every month and you're GTG. Yeah yeah... so the CC company knows how much I spent at Meijers... big hairy deal. |
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Some think it will be paid off easily when they get a job and are "rich". Some think their parents will bail them out, and some just don't care. It is amazing how difficult $4000 is to climb out from underneath when you first start out. Life is expensive, it is best not to start behind the starting line financially. |
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Lots of studies have shown that you will spend on average 12% more by using a credit card than you will using cash. It simply doesn't hurt like forking over the green does. I got sick of the cycle and paid off all debt and am cash only now. Only have a mortgage left and that is on track to go bye bye in 4 years. |