The people to whom banks and lenders most heavily market credit card offers to are not those with outstanding credit and rich credit histories, but instead are to college students and young men and women just entering adult life. On college campuses nationally, mailboxes are flooded with offers, tables are set up in cafeterias, public areas, and even at new student events, enticing freshmen to sign up for a credit card.
The College – Credit Card Collusion
Many major colleges around the nation have partnerships with banks to offer specific card offers (often with the school’s logo emblazoned across the card).
While changes to the way that student credit cards can be marketed have come about due to the recent CARD Act some schools can still potentially earn in the millions of dollars from credit card marketing arrangements. Some even issue college-approved identification cards that double as credit cards.
Increasingly, students are graduating with a degree and finding themselves saddled not only with student loan debt, but also with unsecured credit card debt.
My Parents Will Bail Me Out
Most college students appear to be poor credit risks, with low (or no) income and no possibility of good income for years. Yet banks aggressively market to them. Why? Because most students also have parents and family they turn to in order to help pay the bills. Often this includes paying credit card payments for them. Many parents are now doing this as a matter of course, securing a credit card for their teen who’s off to college and then paying the balance as a way to avoid sending money in the mail.
The average student graduates from college with at least two credit cards in his or her wallet and often with credit card debt measured in four or even five figures. They find themselves saddled with debt that also makes for a huge negative on their credit score, affecting their ability to buy or rent an apartment or a car or even to get a job.
Manage Credit Wisely
Yet doing without credit cards entirely is also probably not a good option because leaving college with little or no credit is no help either. Most agree that at least one credit card with a very low balance is a must by the time graduation comes around.
The trick is to manage that credit wisely. Use common sense, know your budget, and use your card only for things you absolutely need or can pay back easily. Using the card for gas, groceries, or other items you budget for and can pay back when the bill comes is a good start. Some also find that, with the high price of books, they can purchase many of their books with a credit card and pay them off over the next couple of months of the semester.
Parents should be aware of the danger of co-signing for a credit card and what could happen if their child becomes a victim of identity theft or becomes irresponsible for their spending. That becomes the parents’ problem too and puts your own credit at risk.
Talk with your children about credit and how it affects their lives. Offer advice, to help when you can, and remind them that whatever they charge now, they’ll have to pay for eventually and often that $100 pizza and beer binge can become $500 in payments and fees before it’s done.
[Editor's Note: To see real life examples of the increased cost of an item when buying with a credit card and not paying off the balance in full right away check out our true cost of credit calculator]
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