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Credit Card Debt

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Abstract
Credit card debit on college campuses is rapidly growing. Entering college freshman are not aware of
how credit cards can influence their future. Understanding the basics of a credit card are the first thing
that college freshman needs to understand before applying for one. Credit cards can be an ally or
enemy to freshman students. Once in debt what can be done to help future students from making the
same mistakes? There are many things that can be done to help prevent this but the only way debt can
be prevented is for the student to accept financial responsibility when applying and receiving a credit
card.
College Freshman and Credit Card Debt
Emma an eighteen year old college freshman was preparing to enter her first year at Texas State
University. Emma had a job back at her hometown Wal-Mart to help he get some extra money for
expenses. While walking thru the quad on campus Emma noticed that there were a lot of
representatives there offering free merchandise if you signed up for their product. Emma walked up to
one and it was for Capital One credit cards. Steven the representative told Emma that if she applied
and was approved for a credit card that she would receive a free apple iPod. The thought of something
for free made Emma sign up immediately. She was approved from one thousand dollars and would
receive her credit card in the mail in two weeks. When her credit card arrived Emma told herself that
she would only use it in case of an emergency. But she never followed that rule. While in the mall one
weekend with some other students she spotted a Dooney and Bourke purse that she always wanted
but never could afford. She pulled out her credit card and charged the purse. Two weeks later her car
need new tires and she carded that as well. Now with a maxed out card Emma knew that she need to
pay the card off. In the mail she is constantly receiving credit card offers but she just throws them away.
One day she decides that it could not hurt to have one more for just emergencies so she applied and
was approved for five thousand dollars. Emma should have never signed up for another credit card
since she is now maxed out on that one too. Ashamed that she has two maxed out credit cards she
drops her status from a full time student to a part time student so that she could get a better job to help
pay off her credit cards. College freshman will continue to apply for credit cards. Knowing about the
basic understanding, the good and bad sides of credit cards, as well as how to defeat credit card debt
will help college freshman make sound decisions that will help them in the future.
Basic Understanding of Credit Cards
Credit cards are a slim plastic card that allows a customer to purchase an item(s) from a business and
not have to pay for them until later. The way of obtaining a credit card is based on a person's income.
The basic credit card will give you a limit, monthly minimum payment, and interest rate. While most
people think that credit cards have hidden fees and costs, a company can not legally hide costs from its
user. But companies do have costs and fees that most people especially college students would not
understand. For example, if you have never missed a payment and one day you did your credit
company has the right to raise your interest rate. As a credit card holder people could get charged for
getting a duplicate copy of statement, replacement card, using credit card at an ATM, getting a charge
for not having a balance, and getting charge for not using a card in six month period.
Pros of Owning a Credit Card
Credit cards can be a positive thing for incoming freshman to apply for. Credit is one thing that many
people strive for. With having good credit, a person can apply for a loan, get a car, or even purchase a
new home. Other reasons for owning a credit card include emergency situations, and education about
finance.
Everyone from one time to another has had an emergency situation where they needed money. They
need to get a new tire for their car, travel across country to visit family, the list of reasons go on and on.
Credit cards are a good source to be used during emergency situations. It is available funds that
someone might need when they do not have money.
Most freshmen are entering a new life that depends on themselves rather than their parents. They are
learning how to live on their own and manage their own finances. Having a credit card can help in
learning about their money and how they spend it. By learning how they spend money now they stand
a good chance of keeping their money and finances in order. They learn how to pay bills on time and
the rewards from paying things off.
Most credit cards now a day have a reward programs that come along with applying for credit cards.
The reward programs range from return of money after spending so much, flyer miles with certain
airlines, vacation packages and so on. These are incentives for some students to work towards.
Cons of Owning a Credit Card
The problem of credit card debt really came into effect in the early 1990s. The souring demand for
credit cards on campuses was shaped initially by efforts of the newly deregulated banking industry to
find new clients with relatively low levels of outstanding debt and potentially high future incomes
(Manning and Kirshak, 2005, p. 40). The main problem with owning a credit card comes from impulse
buying, identity theft, ruining education as well as credit.
One of the bad effects of credit cards is that student believe that with a credit card they have money at
their disposal to buy things that they normally could not purchase. Impulse buying is when someone
sees something and despite what it costs buys it. Many college students claim that is where their debt
starts. They purchase one thing and believe that they can pay it off but then sees something else and
buys it as well. In the end they have racked up their credit card to the max in no time.
A new threat to credit cards has been identity theft. If college students are not educated about how to
use their credit card safely they could run the risk of getting their identity stolen.
With the growing threat of college student debt many students are finding that they can not pay back
their bills while they are attending college. Students are forced to either drop their status from full to
part time or quit school all around. Because of a credit card students are forced to give up their
education for a job.
Credit cards can be a good thing if used correctly. But in situations where students are in debt they run
the risk of ruining their credit. With a ruined credit students will find it hard to get things that they need
in future.
How to Defeat Credit Card Debt
With credit card debt on the rise in today's society, students need to understand that they are not alone.
They need support and people who are eager and willing to help make a difference in their lives. Most
students that enter debt feel ashamed and keep their debt a secret until it is to late. Colleges need to
make a personal finance class mandatory to every degree plan. Credit education programs may
facilitate better financial practices and counter the economic impact of credit mistakes on the individual,
their families, business, and the economy (Jones, 2005, p.15).
Education is not the only thing that can help students defeat credit card debt the government needs to
start taking an active role in this problem. Representative Louise Slaughter from New York has
proposed a bill that she believes will not eliminate credit card debt but help in the prevention of it. The
proposed bill would limit the amount of credit extended to students to 20% of their total income if they
have a co-signer, like a parent, or $500 without a co-signer (Silver-Greenberg, 2008, p.1).
Although there is a good reason for college freshman to obtain credit cards, they need to understand
what they are signing up for and have the maturity to spend it wisely. While there are people in the
government working on this current issue more needs to be done to help prevent students from
entering debt at an early age. Schools have taken steps to limit the way solicitor attract students on
campus but there are other was than a solicitor to obtain a credit card. While credit knowledge should
start from the home most of the time is does not. While this is a very important issue more research
needs to be done to help get a better understanding of how this problem can be prevented. References
Adams, T., & Moore, M. (2007, September). High-Risk Health and Credit Behavior Among 18- to 25-
Year-Old College Students. Journal of American College Health, 56(2), 101-108. Retrieved March 6,
2008, from Academic Search Complete database.
Avard, S., Manton, E., English, D., & Walker, J. (2005, June). The Financial Knowledge of College
Freshmen. College Student Journal, 39(2), 321-339. Retrieved January 26, 2008, from Academic
Search Complete database.
Jones, J. (2005). College Students' Knowledge and Use of Credit. Financial Counseling & Planning,
16(2), 9-16. Retrieved February 22, 2008, from Business Source Complete database.
Norvilitis, J., Merwin, M., Osberg, T., Roehling, P., Young, P., & Kamas, M. (2006, June). Personality
Factors, Money Attitudes, Financial Knowledge, and Credit-Card Debt in College Students. Journal of
Applied Social Psychology, 36(6), 1395-1413. Retrieved March 6, 2008
Manning, Robert D., Kirshak, Ray (2005) Credit Cards on Campus: Academic Inquiry, Objective
Empiricism, or Advocacy Research? NASFAA Journal of Student Financial Aid, 35 (1), 39-48. Retrieved
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Mansfield, P., & Pinto, M. (2007, Spring). Marketing Credit Cards To College Students: Will Legislation
Protect Them From Excessive Debt?. Marketing Management Journal, 17(1), 112-122. Retrieved
February 21, 2008, from Business Source Complete database.
Silver-Greenberg, J. (2007, September 10). Fixing the College Credit-Card Mess. Business Week
Online, Retrieved February 22, 2008, from Academic Search Complete database
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