Credit Card Debts: Causes & Preventions

CAUSES of CREDIT CARD DEBTS
The issue of credit-card debt among college students has received increasing attention recently because students often receive incentives, such as t-shirts or mugs, to apply for cards, and requirements, such as previous credit history, are often waived.

Colleges, too, have embraced the idea of credit cards among their students which caused students to fall to the credit cards trap. 77 percent of colleges reported accepting credit cards for payment of tuition. Further, many colleges allow companies to solicit students and alumni with imprint cards, cards personalized with the institution's logo. Credit card companies often are allowed to seek business on campus.

Other students may get into debt because of the assumption that they will easily get out of debt upon graduation from college. Graduate students, although concerned about their debt, viewed it as necessary for paying bills and staying in school. Unfortunately, this belief that debt will be quickly repaid can be misguided. Today's college students have grown up in a culture saturated with credit cards, but may view credit as something abstract or equivalent to earnings.

Another factor related to student credit card debt is one's attitude toward money. Teenagers experience "premature affluence" because of their high levels of discretionary income and almost no bills. Some teens may become used to a certain lifestyle and not know how to adjust when bills increase in college. Further, some students may be more comfortable with debt. Higher levels of debt in college students were related to greater tolerance of debt. Students may be willing to tolerate debt so that they can maintain the comfortable lifestyle to which they are accustomed.

PREVENTION of CREDIT CARD DEBTS
Clearly, consumer debt is a problem for a significant number of students. Many students lack the knowledge of how to handle credit and have attitudes that suggest that debt is acceptable. What then can be done?

First, education is the key. However, education must go beyond providing information. It is important to educate students about credit cards. Students need to know basic guidelines for eliminating and staying out of debt such as knowing credit card balances and interest rates, knowing that transferring high-interest rate balances to lower rate cards provides instant savings (if the high rate cards are immediately cut up), and that debit cards and checks allow students to only spend what they actually have.

Colleges should be encouraged to develop their own programs or modify existing high school programs to increase awareness and financial skills. A logical place for such a program would be in conjunction with new student orientation, although programming should be offered throughout the year and for all students.

Education and awareness alone may not be enough to reduce the problem of student credit card debt. Changing the process by which students obtain credit cards on campus is another important component. For example, a recommendation is that students not be allowed to receive free gifts for applying until after they have read a credit card educational brochure. This help to prevent any unnecessary credit card usage and unawareness of the high interest repayable if there’s default.

While colleges are in a position to teach credit card savvy to students, that task is not the sole responsibility of--nor should it begin with--the institution of higher education. Ideally, money management techniques would be first taught in the home with relevant programming implemented at the elementary and high school levels. The issue at hand is a societal problem, which requires a concerted effort by parents, educators, elected officials et al.