Monday, September 28, 1998
Companies entice students into easy credit access, spendthrift
habits
DEBT: Managing money, reading fine print essential in selecting
right card
By Michelle Navarro
Daily Bruin Senior Staff
They set up their tables in every corner of campus, under the
trees and all over Bruin Walk.
They entice students with promises of free T-shirts and candy
bars.
"Come, come over here," they say.
It’s tempting and extremely alluring to the hungry and broke
student, but it is also potentially dangerous. Every year, there
are many students who sign up for credit cards in order to get the
free T-shirt. But their lack of experience with buying on credit
often causes some of them to build up massive amounts of debt.
When the leaves begin to fall and flood the campus, so do credit
card companies, ready to sign up inexperienced college
students.
College customers are ideal for these companies because
eventually, they will be earning handsome incomes. All the
companies have to do is convince students to start business with
them now.
Since banks feel that students are such great customers, it’s no
wonder that an estimated 60 percent of students hold at least one
credit card, and 20 percent have four or more.
Although a credit card may help pay for books, tuition, food and
rent, it can also lead to a dungeon of debt.
Last year, fourth-year psychology student Yvonne Yen managed to
ring up $6,000 in debt from her credit cards.
"It accumulates easy," she said. "Like at Christmas, you don’t
think about it."
Racking up a credit report in the red can be as easy as handing
over the card to pay the waiter for dinner. So, when signing over
for that free bag of M&M’s, keep in mind that it will take good
management skills to stay away from the big monthly bills.
"Good advice would be to pay off your balance every month, don’t
use the card for any major purchases and don’t use it to live off
of either," said Scott Collins, team manager for Money Management
International, a service that provides counseling on debt
management.
Student annual percentage rates (APR) for credit cards are also
something to watch out for.
The APR is the amount the credit card owner will be charged
against their credit balance each month. Some companies have a
fixed rate, and others have a variable or "floating" rate.
Bank Rate Monitor, a service that provides financial data,
research and editorial information, reports that the average APR is
about 15.13 percent.
The student cards offered by several major credit card companies
have rates that loom far above that national figure, however.
For example, the standard student Master Card offered by
Citibank has an APR of 17.9, and the Wells Fargo Bank student Visa
card attaches a 20.05 percent rate.
But with a little shopping around, students may find a
relatively low rate, such as 12.40 percent for the student classic
Master Card offered by USAA Savings Bank.
Often times, credit card companies will offer a low introductory
APR, which could potentially skyrocket later on.
If students still find themselves in debt, there are ways to
escape credit despair.
"The first step is to cut up the credit cards," Collins
said.
If one card is saved, be sure to use it only in an emergency.
Make the monthly payments or try to work out a schedule with the
creditors, and don’t let things slide out of control.
When in doubt, there are several credit counseling services out
there such as the Consumer Credit Counseling Service and Money
Management Services who are dedicated to and experienced in helping
people repay their financial obligations.
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