Beware the oh-so-attractive credit card - Avoid teen debt

Over the summer, Kathleen received a letter that she thought was from her college.  The envelope indicated in bold print that there was “important information enclosed,” and it had the name of her school in a see-through window.

It turned out to be a solicitation for a credit card. If she opened the account and charged $25 or more, “subject to availability,” Kathleen could redeem a spring break coupon for a two-for-one airfare, cruise or hotel room, but she had to charge it on a Visa card.

How many students do you think opened the account just to get the deal? This is just one of the many creative ways that you will be solicited by credit card companies. In addition to being solicited at shopping malls, airports and in the mail, you will be targeted and offered “free stuff” at your college’s student union, bookstore and athletic events.

Credit card companies spend a lot of time and money determining exactly what attractive “free stuff” they can offer to tempt you to sign up for a card.

Even if you never use the accounts, having them open will hurt your credit rating because of the extra available credit you will have. That can affect your ability in the future to get the home mortgage, car loan, student loan or business loan you will really need or want.

In this article, I will answer some of the questions that high school and college students most frequently ask about credit
cards.

Q: What kinds of things have you seen college students use credit cards for that really got them into financial
trouble?

A: Paying for school break vacations, expensive hobbies like snow skiing, and the unanticipated costs of moving and living off campus have frequently resulted in students getting into financial trouble.  However, most college students get into trouble because of an accumulation of smaller charges over time. They try to live the same lifestyle that they lived at home when their parents paid for many of the things they now have to pay for.

Q: What makes credit cards so attractive to young people?

A: Young people 18 to 25 are hungry consumers who want everything, and they want it now. The idea of delayed
gratification, saving for something that you otherwise can’t afford, is foreign to too many young people.

For some, it is because when they were growing up, their parents and grandparents were so generous that they had
everything they wanted. For others who didn’t get some of the things they wanted, they think they can have those things with a credit card.

Too many students treat credit cards like more money or free money. But they’re really loans that must be repaid, often with exorbitant rates of interest.

And you can’t pull an all-nighter to avoid the consequences of credit card abuse once you are in too deep.

Q: Are high schools and colleges doing more today to improve students’ financial IQs?

A: More and more states, school districts and colleges are offering financial literacy courses, and there are an increasing number of credit information Web sites where anyone can go to learn financial lessons.

Today, many families don’t deal as proactively with money and finances as they once did. As a result, you don’t see and hear families discussing and making important financial choices and decisions, and you almost never hear anyone say, “We don’t need that,” or “We can’t afford it.”