Experts warn against credit card excess

Experts say many college students haven't been taught how to use credit cards responsibly.

By Katrina Mehl

Published Nov. 13, 2008

It seems easy for students to charge those new boots or that new video game to a credit card, but you could be paying it off for the next 10 years, experts say.

In an age of convenience, the temptation for college students to swipe the plastic is real.

Junior Matthew Ligeti applied for a credit card several years ago and pays the bills himself. Since having the card, he had dealt with credit card debt.

"I was late a couple of times, or didn't have the money in the bank," Ligeti said. "My folks would tell me to put my textbooks on my credit card and they would reimburse me and I would forget to remind them."

He paid off the debt more than a year ago, and now is more careful about how he uses the card.

"Students are heavily targeted both on and off campus," said Brenda Procter, who works for the MU Personal Financial Planning Department. "When they first get here vendors will entice students to sign up for credit cards, but they don't take into account the necessity for income."

Starla Ivey, an MU finance professor, agrees.

"College students are a wonderful audience for immediate gratification," she said. "They are not used to waiting."

The easy credit card helps with that, she said.

Procter said, ideally, if people decide they want a credit card, they would ask themselves if they can pay the bill at the end of the month.

"I've heard students almost brag about putting something on plastic without realizing the ramifications of it," Procter said.

The interest that is paid on credit card debt is a huge part of owning a card. Many students only look at the minimum payment on each bill, Ivey said, without taking into account the interest they will pay.

"If a student were to go on spring break and put $3,000 on their credit card, and then decided that they were going to pay $60 a month minimum with 20 percent interest on the card, it would take them close to nine years to pay it off and would actually cost over $6,000," Ivey said.

There are benefits. Procter said paying off credit card bills on time and having no debt built up can build good credit.

Ligeti paid off his debt, and was able to co-sign for a new car before the current financial crisis, which has affected credit card companies.

Ivey said with problems such as rising unemployment, credit card bills "have a tendency to be at the bottom of the totem pole."

"With the economy that we have right now, where a lot of people are getting laid off, without money coming into the home you have to pay the most important bills first," she said.

There are ways to responsibly use a credit card.

"Do not carry the card with you. Keep it someplace safe, and take into account things like interest rate and paying on time before applying for one," Procter said. "People weren't really taught in high school how to evaluate credit card usage and interest."

Procter and Ivey both suggested education as a way for consumers to avoid credit card debt.

As of last year, Missouri high school students are required to take personal finance classes.

Ivey teaches classes that cover personal finance topics, such as car insurance, homeowner insurance, budgets, stock, bonds and mutual funds.

"Classes like personal finance give a person a heightened sense of awareness, even though they won't be a financial genius," Ivey said.