Credit Cards: An Evil Debit Card Twin!

If you have stumbled upon this article headline you may be reading only to dispute the fact in your mind that credit cards are not an evil debit card twin, but are an excellent way to build your credit. In fact, if you have ever used a credit card in your lifetime, you have probably pondered the many benefits of using a credit card to the benefits of a debit card.

But for college undergraduates, the whole table turns. Some undergrads may, in fact, be thinking that credit cards are no good and shouldn't deserve an ounce of attention. The reason for this mindset is the fact that, according to the Federal Trade Commission, more than 80% of college undergrads have at least one credit card. Not only that, but the average balance of credit cards that undergraduates carry is over $2000. There is no doubt that there are others out there who are carrying a whole lot more than that, probably with more than 2 or 3 credit cards. When it's all added up, undergraduate students in college are in debt: big time!

There may be plenty of reasons for this, and I'm not trying to make excuses for any of it. Responsibility reaps its own rewards, as well as the lack of responsibility, meaning paying off those credit cards on time is always a big deal! But for the average college student who may know nothing about credit cards in the first place when they get that piece of plastic in the mail, it could be just like extra money. Unfortunately, that extra money will have to be paid back by the end of the month and as the FTC tells us, most college students fail to do so.

Let's face it: some college kids may just be too irresponsible or perhaps simply may not know enough to turn down that enticing offer of $500 right now on a credit card. Who cares what APR means and what a billing cycle is - money is money, right? Wrong! Interest rates, also known as an APY or APR, will have an adverse affect on the amount of credit that you've used already. For example, some interest rates on credit cards can be as high as 18-19%. That can mean a lot for a simple $300 or $500 balance, stretching out the amount of time that you'll have to pay it off. The minimum payment of $12-$20 won't cut it as the amount that adds to your balance (the interest) will exceed your payment.

What's the solution, then? Anybody can take a guess at this, because there probably is no one way to prevent a college student from piling on credit card debt. But perhaps the undergrad's mom or dad should give them a heads up about credit cards before they go off to college, explaining the woes and benefits of using a credit card! Or just maybe there should be a high school mandatory class that will give students a chance to learn all about credit cards, loans, and how it relates to their credit scores. If only those two techniques are employed about half the time they should be, it is safe to say that the amount of undergraduates with credit card debt would be much lower! Education leads to responsible actions, thus making college students more responsible in how they handle their credit and credit cards. So, while not saying that undergraduates don't share any part of the blame for their high balances on credit cards, much can be said about the affects of education and learning about credit before it's pushed in their faces on college campuses!

Sources:
Federal Trade Commission. Project Credit Smarts - "Did You Know" section. (http://www.ftc.gov/)