Students get plenty of credit card offers when they enter college, and many decide to take on the responsibility of a credit card. Those students who do get credit cards often graduate with student credit card debt, which can be both a good thing and a bad thing.
Facts
As many as 75 percent of college students had credit cards in 2007, according to a 2004 Nellie Mae study, a significant jump from the 67 percent who had credit cards a decade before. The average college student graduates from school with $2,200 in credit card debt, according to a study from Nellie Mae cited in testimony before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
Benefits
Credit card debt for students isn't all bad. For some students, the availability of credit makes it possible to pay for college expenses. According to a U.S. PIRG study released in 2008, 55 percent of students said that they used their credit cards to pay for books and related class requirements, and 24 percent said they had used their cards to make tuition payments. Responsible credit card use also helps students start to build a credit history.
Risks
Many students run up debt that they don't need--55 percent told the PIRG researchers that they used their credit cards to pay for "weekends and pizza"--and don't understand the financial responsibility that comes with credit card ownership. One out of four students in the PIRG study admitted to paying their credit card bill late--thereby incurring additional fees--and 6 percent had had their cards canceled by the credit card company because of failure to pay, both behaviors that can increase debt and damage credit history.
Effects
Students who graduate with high levels of credit card debt may experience money-related stress. Thirty percent of people in their twenties said they worried about debt in a survey done by "USA Today" and the National Endowment for Financial Education presented before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
Considerations
According to Iowa's Office of the Attorney General, students should avoid taking out too many credit cards and should focus on one or two cards that they feel confident they can make payments for each month. Make sure you understand your card's interest rate and any circumstances--such as late payment--that could increase the interest rate.
Member Comments