Your first credit card--it's a rite of passage to adulthood. However, new findings show that young consumers might not be ready for the responsibility that comes with a credit card. A new survey from National Jumpstart, a group that measures financial literacy among students, found that financial literacy among high school students had fallen to its lowest levels ever. A 2009 study from Sallie Mae found that 84 percent of college undergraduates had at least one credit card, up from 76 percent in 2004. This increase in credit card use has seen a corresponding rise in credit card debt for young consumers. The study showed that college seniors graduated with credit card debt of around $4100 an increase of over $2000 from 2004. In addition, it was found that close to 20 percent of college seniors had balances of greater than $7000. The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act), that recently went into effect, focuses on these issues. Provisions in the bill address co-signer requirements and marketing techniques, such as free t-shirt or pizza giveaways, aimed at college students and campuses. Under the Credit CARD Act, consumers under the age of 21 must show proof of income in order to get around the co-signer requirement. However, according to a recent ABC News segment, banks are finding ways to get around that requirement. ABC found that a few banks allowed students to co-sign for other students. Some banks even allowed students to count their student loan disbursements as income.
Nevertheless, there is good news. Under the Credit CARD Act, colleges and universities now have to disclose their dealings with credit card companies. Banks also have to disclose their deals with schools and file annual reports to the Federal Reserve Board.
How much does your dream life really cost? Get a “reality check” with this week’s quiz here.
Results of the first reader poll are in: The results were evenly split with 50 percent of readers saying that they suffer from debt-related stress and 40 percent of readers saying that debt is not a stressor in their lives. Please vote in this week’s poll (bottom of right column): Should access to credit cards be restricted for students between the ages of 18 and 21?
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Jane, your post sets forth some unfortunate truths about the way credit card companies relate to college students. I am glad to see that the Credit CARD Act attempts to restrict on-campus marketing to students. Now if something could be done about branded credit cards and the cozy relationships between colleges (or college associated organizations) and the credit card companies! But telling an organization that they shouldn't do business with credit card companies when they are making money out of the deal is a hard sell.
ReplyDeleteIt is good that students will have to disclose their credit card companies. This will help students to be more responsible with their cards, since their debts will not be a secret anymore
ReplyDeleteAnd now for my two cents...Credit Cards and student should not be mentioned in the same breath. While changes have been made in marketing on campus what about preaching some of that good old fashion abstanance. If someone were to really think about the fact if you use money you borrow to pay for credit extended you pay interest on money borrowed and interest on credit cards unless you pay in full every month. Let's face it, if you could do that you could probably pay cash in the beginning. Where does the vicious cycle end. I refuse to pay interest, I already am stuck with paying taxes and that's enough.
ReplyDeleteI do know that when I was younger I had credit cards (I no longer do), but I do not think it wise on my part. I fully believe that when you are 18-23 years of age you do not actually grasp the full responsibility that come with using that credit card. When you are that young you use the card as much as you need and think it is okay I can pay the bill off when it comes in the mail until you are so far in debt that it is hard to recoop.
ReplyDeleteMy very first card was an American Express card, and this was probably the best card to have as I had to pay the balance off every month.
ReplyDeletePerhaps the Amex card is the best training tool for college students since the balance has to be paid every month. Believe me, if you know you have to pay it off every month, your balance never gets that high!