Article Resources

The Easy Money of Student Credit Cards

When I was an undergraduate student, you could walk through the student union on any given day and be handed a couple applications for student credit cards. In the spring and fall, there were big booths set up outside giving away shirts, mugs, music and cash. The banks were trying to lure new applicants for student credit cards and it worked. It was so easy to get a credit card. I did not know one person who was denied. Yet I knew plenty of people who only paid their minimum balances each month and kept ringing up additional purchases on their cards. The allure was understandable. It was like free money during a time when most of us had little. Ah, the freedom. The things we could buy. The debts we could tally.

Many university administrations and state governments are now restricting solicitations for student credit cards on campuses. They have begun to realize that a lot of students are taking on the responsibility of a credit card before they have the knowledge and income to support it. Students are an easy target, after all. Most are strapped for cash and are experiencing more freedom and independence than ever before. Give them a credit card and they may not know what they are getting themselves into. A U.S. PIRG study released last March surveyed college students and their credit card habits. Freshmen who were responsible for paying their own bills on student credit cards had an outstanding balance of around $1300; seniors, an average of over $2500. A late fee had been incurred by about 25 percent of those surveyed. Over 5 percent had their cards canceled, because of delinquency.

Banks who offer student credit cards claim they are doing so responsibly. They say having a credit card allows students an opportunity to budget and establish a relationship with a bank. They also cite studies that indicate that the use and abuse of student credit cards is not as bad as the U.S. PIRG study claims. According to those studies, the unpaid balance on student credit cards is an average under $500, and only 34 percent of students actually have a credit card in their name only. Many credit card companies are now offering free seminars to help students learn to budget and manage their finances responsibly. They believe there is a role for student credit cards in the financial development of students.

University administrators do not want to ban student credit cards from campuses. They simply want to assure that banks offering them on their campuses are doing it in a way that is not predatory or misleading. Student credit cards can be a great financial tool for students, if they are used responsibly and with full respect to what can happen if the bills are not paid.