‘Credit Cards Are Greater Threat on Campus than Alcohol or Sexually Transmitted Diseases’

On Monday, I discussed how lenders are once again extending more credit to risky borrowers, but there was another report recently issued that calls attention to another group that is common target for credit card issuers: college students.

Fox Business reported on April 16, 2012, that a recent paper by the International Journal of Business and Social Science not only found that 70 percent of American college students have credit cards, but more than 90 percent of them are carrying monthly credit card debt. Furthermore, five of every six of those students do not know their cards’ interest rates, 75 percent do not know their late payment charges and 70 percent do not know what their over-balance-limit fees might be, according to Fox.

“Our students lacked even basic financial knowledge of a common credit tool that many of our students used every day,” the study concluded. “There is no way to describe these results as a success in education of financial literacy.”

Whereas the study found that the average college student in 2004 had $946 in credit card debt, the average more than quadrupled five years later, standing at $4,100 by 2009. The study’s authors cited other research indicating college students were solicited for credit cards 25-50 times a year with incentives including T-shirts and iPods for students to sign up while income and employment requirements were eliminated to make credit cards easier to get. Furthermore, one-third of students never discuss the credit card decision with their parents, leading some to exclaim that “credit cards are greater threat on campus than alcohol or sexually transmitted diseases,” according to the study.

Many clients entering my office to file Chapter 7 or Chapter 13 bankruptcy are only a few years removed from college graduation, but have found themselves in over their heads with a combination of student loan and credit card debt. Because student loan debt can only be discharged in extremely rare circumstances, it is important that younger borrowers understand the consequences of these debts. On Friday, I will discuss how one graduate overcame this very problem.

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