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Students Fall for Credit Cards' Lure

Statistics show that college students across the United States are increasingly suffering from credit debt. Here are ways to identify credit card debt and ways to solve it.

Email icon  awc223@nyu.edu

You know you’ve got credit debt when you start borrowing money from your friend’s friend whose name is “Spike,” or when you need to use your charge card for a pack of Dentyne Ice gum. And although you probably know that paying off one credit card with another is a ridiculous idea, it comes across your mind anyway.

Statistics show that college students in the United States are increasingly suffering from credit debt. According to Nellie Mae, a corporation dedicated in providing student loan programs, the average credit card debt among undergraduate students has increased by nearly $1,000 during the past two years.

We all remember the first day of school. We’re equipped with new pens, notebooks and maybe even a shiny new piece of plastic to start off the four-year undergraduate study away from parents. But is it really that wise to provide a student with that much responsibility all at once? Credit card companies think so.

Taking a stroll around campus during orientation, one couldn’t miss the colorful balloons strung to tables where companies offered free Frisbees and footballs for signing up for a $1,000 credit limit. Even with student loans and being jobless, students are surprisingly a good credit risk. As tomorrow’s newly employed workers, their future earnings potential is enormous, making them a target market. Research has shown that students are profitable customers that tend to stay loyal with their first card, spending plenty for the years to follow.

“There are so many shops around campus. It’s all a big trap for students to spend money,” said Alex Wan, a New York University junior who has been dependent on his Visa card since the age of 17. He is still working to pay off his $1,000 debt from buying clothes and other electronic gadgets from the Internet.

Credit card companies also target college students because they believe that the parents who can provide a college education can also run to the rescue if the student’s credit situation comes to desperate terms.

“It’s not just about independence and face, but parents are always looking for a way to teach their kids,” said Edward Yeung, a Canadian University student who’s taking time off in New York City.

Most parents should be afraid to know that most college students don’t even know what APR means.

Annual Percentage Rate : The interest that is calculated every month depending on the amount spent. Most credit card companies like to entice students with their “zero percent APR” offer for the first six months.

Laying the trap. Of course, the zero percent APR isn’t the only attraction that companies such as MasterCard and Visa use in their tactics to lure innocent young graduates entering the world of independence. Oddly enough, new students are attracted to the free T-shirts and hats offered with a credit contract.

Students who intend to use their credit cards only for emergencies usually find it all too easy to use the cards for impulse shopping. The Consumer Federation of America has found that although there are affluent families that usually pay off debts and then impose financial rules upon the student, there are also students who are forced to drop out of college to work off the debt, and there have even been cases of suicides.

The statistics are startling. The average credit card debt per student in 2001 was $2,237, an increase of 43 percent since 2000. In the same year, there has been a 78 percent increase of undergraduates holding credit cards. Eighty-three percent of undergraduate students attending four-year institutions have at least one credit card. Although credit cards are good ways to build credit for the future and are a useful during emergencies, numbers say that students are using them for far more.

Credit cards don’t allow customers to spread the amount they owe over a set period of time, unlike traditional loans. Minimum payments are received monthly and are usually two percent of the overall balance. However, what many college students fail to understand is that by paying only the minimum amount each month instead of paying the entire balance, their debt will continue grow significantly.

You know you’ve got credit debt when …

1. The magnetic strip is so worn that the cashier has to type in your card number.

2. You use other credit cards to pay off a credit card.

3. You start borrowing money from “Spike,” who is a friend of a friend.

4. Your credit card number pops up on your browser when you type in the first number.

5. Your mail never fits in your mailbox, and the UPS guy knows you by first name.

6. You spend several minutes at the counter calculating which card you’re going to use.

7. You need to use your credit card to charge your tic tacs before a date at the nearest campus eatery. And you’ve charged with your meal plan dollars, of course.

8. Friday nights are casino nights at the blackjack table, where you hope to use your winnings for the monthly payment.

9. You have to speak to your credit company over the phone each time you make a purchase because they think your card has been stolen.

10. You ask your parents for loans that you promise to pay back once you’ve gotten that job after graduation.

“I’ve tried to pay a credit card with another card once, but it really doesn’t work if you think about it,” Wan said. “It’s like having eight jars with five lids — you’ll never be able to cover them all.”

Even if you’re already in debt, you can still dig yourself out. Here’s how :

1. Pay more than the minimum balance due monthly.

2. Try not to have more than one credit card.

3. Pay on time to keep good credit and prevent any additional fees.

4. Come up with a spending schedule.

5. Use debit cards instead, which have a secured amount of money that is deducted straight away from a checking or savings account.

For more information, visit www.yourcreditcardcompanies.com or www.consumercredit.com.