The Other Kind of Credit on Campus

Faculty and staff aren’t the only ones welcoming students back to campus in the fall. Credit card companies and banks often stake out high traffic areas and offer attractive gifts to entice students to apply for credit cards. Over the years, their tactics have become increasingly aggressive, spawning efforts to contain and regulate them. These efforts are targeted to stop companies from taking advantage of the students’ lack of financial knowledge and to reduce the risk of credit card abuse by students.

Learn more about the extent of the problem and what three resources parents can use to prepare their son or daughter to avoid the credit trap:

The Scope of the Problem Most students on campus are affected by credit card marketing in some way. A 2008 survey by the U.S. Public Interest Research Group highlights the following statistics:

• 76% of students stop by tables to consider offers or apply for a credit card
• 66% of students have at least one credit card. Of these, 30% reported that their parents paid the bill each month, and 34% reported carrying a balance from month-to-month while paying a finance charge to do so.

An additional statistic from a 2004 study by student loan lender Nellie Mae found that by the time they reach their senior year, 56% of students carry four or more cards, with an average balance of $2,864. Many students carry credit card balances far higher.

Education is Key 
Surely a credit card is a convenient, and some would say necessary, financial tool for students. Parents who communicate their expectations early and educate their college-bound children about the responsible use of credit before they leave for campus may head off big problems later on.

Here are three resources which are ideal for family discussions:

1. 40 Money Management Tips Every College Freshman Should Know is a free, downloadable publication that teaches young people to learn how to take control of their money instead of letting it control them. It was written and prepared by the National Endowment for Financial Education.
2. Understanding Credit Cards is a free resource available for download by the American Financial Services Association Education Foundation, part of the national trade association for the consumer credit industry. It is a great discussion tool for families with young adults.
3. Colleges and universities have increased the amount of financial education on campus, incorporating it into summer orientations and ongoing education. For example, DePaul University has established the Financial Fitness Program for their students. Although some of the workshops and services are for DePaul students only, the website provides some useful articles and worksheets regarding money management, credit education and debt control.