Numbers can tell us a lot, and it is important that we consider the sometimes surprising numbers regarding college student use of credit cards. In our previous post, we looked at some of the current statistics regarding student credit card use. In this post, we consider not only the numbers, but also what parents might do to help their college students to understand and work with their credit cards.
It is clear when we look at some of the numbers surrounding college student credit card use that credit cards are an important part of college student life. Students often have multiple cards and they use those cards to pay for everything from tuition, to textbooks, to food and clothing. Many students carry a balance – which may be because of lack of understanding or from irresponsibility – but which also may be out of necessity. Student credit card use mirrors what we are learning about American society’s use of credit cards.
College students often find it thrilling to have their first credit card. It is, for many, a symbol of adulthood and independence. Today’s college students have grown up in a world that has increasingly used credit cards and electronic means for monetary transactions. Paychecks are often directly deposited, bills can be paid online, credit cards are used for store purchases, restaurant purchases, on line purchases, gas purchases, movie tickets, groceries. It is possible to go for days, and even weeks, handling very little actual cash.
There are some valid reasons why students may need to have a credit card. It can be vital in case of emergency. In the case of a medical emergency, a car breakdown, a need for an unexpected plane ticket home, having a credit card may be crucial. Credit cards are often required to purchase anything on line. Students use the internet for much of their shopping – including textbooks, gifts, and necessary personal items. Having a credit card – and using it responsibly – helps to build a credit history, something the student will need when he graduates. Learning to use a credit card responsibly may take practice, and doing this with a lower limit credit card while in college may prove important.
There are also some dangers and drawbacks to credit card use in the college world. Credit card companies often woo college students with many offers of cards. The companies know that parents may often help students out if they overspend. They also know that the college student who takes a credit card may be a customer of that company for life. It is good business for the companies. However, many students do not understand credit history or credit score, APR, accumulating interest, credit limits. Student credit cards often come with high interest rates. Some students may be tempted by the instant gratification that credit cards provide, by the distant reality of paying off credit card debt. Some students have a clear awareness of the issues, but have no choice but to use their cards to pay for their education.
Many solutions have been suggested to address student credit card debt. Some of these concerns are currently being addressed by the Credit Card Accountability Responsibility and Disclosure Act recently passed by Congress. Among other things, this will restrict students under twenty-one from getting a card unless a parent or guardian gives consent or the student can offer proof that he will be able to repay. Debit cards may be a wise solution for some students. Credit cards with lower limits for students might help them learn appropriate usage with less liability.
As college parents, we need to consider the facts about student use of credit cards carefully. Several of the statistics speak directly to us. Nearly half of students surveyed said they experience high levels of anxiety about paying credit card bills. Almost one-third of students say they rarely or never discussed credit card use with their parents. Nearly eighty-five percent said they would like more education about financial management, and nearly half said they would like to receive financial information from their parents.
Parents can talk to their students about credit cards, debt, and financial planning – and the students are ready – and willing – to listen. Find out whether your student has a credit card – or multiple cards. Discuss whether she is carrying a balance, and if so, what she can do to reduce that debt. Discuss how the card is being used. Encourage your student to think about needs vs. wants, to try to pay on time each month and to pay in full if possible. Discuss whether you are willing to help out if she goes over her credit limit or is carrying a balance.
Help your student think carefully about the values of having a card and the responsibility of having a credit card. Your student will be a wiser, and happier, student because of your discussions – both now and in the future.