Collegiate Credit

It’s summer. So you’re not really thinking of college. But this is just a temporary respite. Soon the halls of knowledge will swing open again—and with it, debt.

Credit cards are a wonderful convenience. But they seem to be getting too convenient for college students. Close to 85 percent of undergraduate college students had at least one credit card according to the study, “How Undergraduate Students Use Credit Cards,” by SallieMae.

That convenience is becoming a problem. Of those students with credit cards, over 80 percent carried balances. And they weren’t small balances. The median debt on those cards was over $1,600 and close to 20% of seniors carried balances greater than $7,000.

They were unprepared to use credit. One-third of the students surveyed rarely or never discussed credit card use with parents. Yet nearly all undergrads, 84 percent, wanted more information on how to manage their finances.

Parents, unless you want to hear their woes or resort to bailing them out, take action. In addition to the birds and the bees, and drinking and driving, you now need to include a lecture on debt and interest.

For you college students out there, the report offered several tips for controlling debt, including:

• Build a plan to pay for college. This should include supplies and transportation along with tuition and fees. That way you won’t be surprised to the point of having to put schooling on your credit card.
• Charge only what you can afford to pay in full when your statement arrives. You don’t want to pay interest all year for a pizza that lasts one night. If you can’t afford that dream spring break trip you can’t afford the trip. A credit card makes it doable; it doesn’t make it affordable.
• Pay your bill before it’s due. Late fees add up, and it doesn’t do much for your credit score either. Banks are in trouble, but there’s no reason you have to be the one bailing them out.
• Keep copies of receipts and compare them to your statement. Make sure you are only being charged for what you charged. “Friends” have been known to help themselves to their buddy’s credit.

More help for college students (and their parents) is available. An Education Investment Planner at www.SallieMae.com/plan can help you estimate the total cost for college and build a plan to pay for it. The publication Be Debt Savvyhelps students learn responsible debt management practices and is available at www.SallieMae.com/bedebtsavvy. It covers everything from student loans to credit cards.

A fun and informative resource is a book by Mitch Anthony. It speaks to problems people can run into misusing credit. Send your student to the video version of it by having them search on YouTube for “The Cash In The Hat.”

In summary, remember that a credit card is a convenience, not a source of spending money. If you don’t need it, don’t charge it. If you need it, you can charge it, but have the money ready when the bill shows up.

This article was published under the title "Collegiate Credit" in the Wichita Falls Times Record News on (July 19, 2009)