Credit Cards 101: Helping Students Manage Easy Plastic

Before they ever set foot on campus, college freshmen have typically received dozens of offers for credit cards, giving a whole new meaning to the term "college credit."

The pressure doesn't let up once they've settled into the dorm, says University of Connecticut junior Jeremy Radachowsky. "Very often credit-card companies have booths or tables set up around campus with boxes of T-shirts, candy, prizes, anything they think college students want."

No job, no credit record, no experience with credit? No matter, say credit-card issuers. If you're a full-time college student, it's as easy as filling out a form and waiting for the preapproved card to arrive in the mail. While major credit-card companies have targeted students for at least 15 years, the marketing has become increasingly aggressive during the past five years.

Indeed, students who can't slap down a major credit card to pay for dinner or books are the exception, not the rule. "According to the Roper College Track Financial Services Study, 64 percent of college students have a credit card," says Norma Tharp of the nonprofit Consumer Credit Counseling Service (CCCS) in Atlanta. "That's up five percentage points from 1995." Many have more than one - a big mistake according to consumer experts, who say that the more cards a student has, the easier it is to fall deeply into debt.

Although he signed up for Discover and Visa cards based on the gifts that came with them and because they didn't charge an annual fee, Jeremy says he rarely uses his cards. "I just keep them handy in case of emergencies. Cash is more convenient."

Cash is cheaper

Paying cash is also cheaper than carrying a balance on a credit card, points out Ruth Susswein, executive director of Bankcard Holders of America, a consumer education group. "It's important for kids to keep in mind that a credit card, when the balance is not paid, is a loan, and it's often a very expensive loan.''

But while it's possible to get through college paying cash, "the reality is that young adults are going to be where credit is very available, and they need to learn how to manage their money ... when to avail themselves of credit and when not to," says Suzanne Boas, president of CCCS.

She suggests that parents and student sit down and draw up a budget so everyone will have a good idea of where the money's coming from and where it's going, which expenses the parents will cover and what the child is expected to pay for.

"Otherwise," she says, "that failure to plan is going to catch up with them, and they're going to use credit cards to help them compensate for their lack of planning. They're going to make commitments they can't honor with cash, so then they're going to have to rely on credit."

Mrs. Boas, the mother of a college sophomore, says it's important to explain how easy it is to get overextended. "I call this generation the 'now' generation because there's a lot less delay of gratification. If you want everything now, it's going to cost you."

A few days ago, she relates, a recent college graduate came to the CCCS office for counseling. He had been working as an accountant since May at a salary of $28,000 a year. Finding that he couldn't make ends meet, he took a part-time job that paid $3,900 yearly, for a total gross pay of almost $32,000 a year. His assets are a 1992 car and $250 in stocks. His debts total $85,000: $10,000 on the car, $33,000 in student loans and $42,000 in credit-card debt that he owes to 26 different companies.

"This person obviously wanted it now and got it now and was going to pay for it later," she says. "I call these kids indentured servants. This person is coming out of school and should have his whole life ahead of him. But he's indentured to that debt burden, and it's just horrific."

To ensure that students stay solvent, Ms. Susswein suggests parents get down to basics. "Ask them how many cards they've applied for, because there's no need to have more than one." She also suggests helping them choose a card with no annual fee and the lowest interest rate available, and not be swayed by short-term "teaser rates,"' which will rise.

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