Freshman Credit Crads

- James Truslow Adams

There is a blitzkrieg on college campuses across America by aggressive credit card issuers that entice unsuspecting students into applying for their "consumer cocaine" with free gifts and a promise of a buy now, pay later dream. They bank on two things when dealing with college students. That they will either make tons of money when they graduate college and pay the bills or have their parents bail them out of the financial mess they got themselves into.

It's no secret that many college students are quickly sucked deep into credit card debt. But now it seems the problem can start even before freshman year. Nearly a third of high school seniors reported having a credit card of their own or one co-signed by a parent.

Because young people under 18 technically can't apply for a credit card without a parent's co-signature, it's hard to know precisely how many teens have credit and how many are already in debt. And CardWeb.com, which monitors the credit card industry, doesn't yet track teen cardholders but the number of incoming college freshmen with credit cards quadrupled between 1999 and 2006

It has become the "consumer cocaine" of the 21^st century, addicting our young people, making credit card debt a bigger problem on campus than drinking and social sexual escapades and these freshmen carry an average balance of $1598.

I don't think it's healthy for teenagers to have credit cards before they go to college and credit card marketing campaigns are targeting high school students. Young people DO NOT learn financial responsibility by using a credit card. Most kids can't hand in a paper on time, let alone pay a bill on time.

Most teens are vulnerable to debt because they lack a clear understanding of how credit works. They are never required to take a personal finance course and the courses that are available only touch on credit issues. According to a recent Financial Literacy Poll 78% of college students never have requested a copy their credit report, which contains vital information about your finances. It is a good practice to check your credit report every year for errors. Ninety percent of the credit reports I see each day contain errors of some kind. Errors that could result in costing you a job, an apartment or a lower interest rate.

Check out this story from a client of mine:

"My struggle with debt began right after I graduated from high school. I signed up for a card with a $500 limit and was really good for the first six months. Then I signed up for another card, and things got out of control. Within a couple of years I had eight credit cards and was nearly $10,000 in debt."

My client, now 22, said his undoing was that he had no clue how a credit card worked. He was only paying the minimum payment and thought if he paid that, he was fine.

Interest rates?

Late fees?

He had no idea!

Now, parents and teens concerned about the dangers of credit cards appear to be turning to a new breed of plastic cards like debit cards that are linked to a bank account and prepaid stored-value cards are which "loaded" with a fixed dollar amount, like a gift card.

Either way, teens can spend set amounts without racking up debt.

The drawback though is, when operating on a cash basis, young people still don't learn the nature of credit, credit cards and debt management. A typical mistake parents make is expecting children to make the leap from a childhood savings account to managing a credit card. They need to know how credit works.
But that may require some change on the part of the grownups. The message being passed onto young people is buy now, pay later. You don't have to look any further than the way today's adults treat plastic to see what kinds of messages are being passed on to teens.