Youth and Money
Crazy with Credit
College kids are at high risk for credit card come-ons.
January 2000
PREPARE YOUR TEEN NOW.
TAKE A STROLL THROUGH ANY COLLEGE CAMPUS during orientation week and you'll see tables encouraging your child to join the student government, try out for the fall musical - and sign up for a credit card. According to Consolidated Credit Counseling Services, a nonprofit organization that assists families in financial crisis, 80 percent of colleges and universities permit some form of on-campus credit card solicitation. This leaves teens vulnerable to racking up massive amounts of debt - and getting their credit rating off to a bad start. Not only does revolving debt on student credit cards average more than $2,000, but 10 percent of college students have balances over $7,000, reports Consolidated Credit (consolidatedcredit.org). Once your child turns 18, he or she can receive a credit card-or two or three or five-without your permission, and if he's determined to use it for massive shopping sprees, there's little you can do to stop him. Still, you can take some steps to try to minimize the damage.
TAKE A CRASH COURSE ON CREDIT USE. A 1998 survey found that nearly a quarter of college students don't understand what buying on credit means, so make sure your child does. Encourage him to charge only what he can afford to pay back in full each month. Point out that the average rate on student credit cards is 17 percent, and demonstrate how carrying a balance increases the amount he owes. Moreover, stress how important it will be to have a clean credit rating when, say, he wants to apply for a car loan.
PUT HIS OWN MONEY ON THE LINE. Since it's important for your child to build a credit history-and since he will probably feel peer pressure to have a credit card-don't impose an all out ban on plastic. Try this as a compromise: Have him apply for a secure credit card at his bank. For a list of banks offering secured cards, log on to cardweb.com To secure the credit, he will need to make a deposit equal to his line of credit-which will be tapped in the event he defaults on payments-but he'll otherwise have full charging privelages. So what's the big deal? For one thing, he earns interest on his deposit, which is another way to promote saving. In addition, psychologically he'll have a direct financial link to the credit card, says cardweb.com president Robert McKinley. That makes him less likely to overspend.
SPEAK OUT FOR CHANGE. . In a recent survey nearly 80 percent of Americans said they would support legislation requiring students to receive parental permission, or provide proof of adequate income, before they could obtain a credit card. But Congress still has not acted on this sentiment. That's why Stephen Brobeck, executive director of the Consumer Federation of America, an advocacy organization working to advance pro-consumer policy on issues before Congress, regulatory agencies, and the courts, is encouraging parents to push for such a measure. "Card issuers and college administrators need to take greater responsibility," Brobeck says. But parents will have to demand it first, The CFA website is consumerfed.org
