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Excessive Credit Card Use Causes Student Debt Woes
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By
Jamie Barrett
31 May 2004
(U-WIRE) MANHATTAN, Kan. -Eddie Fishel uses his credit cards for most everything he needs. When his TV went out, he used his credit card to buy a new one.
When he needs groceries or other necessities, he uses his credit card.
Even though he knows credit card use can lead to serious debt, Fishel, a Kansas State senior in mechanical engineering, isn’t worried about the way he uses his credit cards.
“I haven’t had any problems as far as being in extreme debt,” he said. “I charge more than I can pay on my credit card in a month, but I haven’t had any problems with them at all.”
Fishel is part of the 83 percent of undergraduate college students nationwide who have at least one credit card, according to a recent study published by Nellie Mae.
According to the study, more undergraduate college students are carrying credit cards than ever before. The percentage of students that have at least one credit card has gone up 24 percent since 1998.
Kim Rebel, a certified credit counselor for the Consumer Credit Counseling Service, said using credit cards can be one way to build good credit, but many college students who use them have overextended limits, high balances and end up falling behind on payments.
She said she suggests people only use credit cards for emergency uses.
“I always tell people if you can eat it, wear it or drink it, it is not an emergency,” Rebel said.
Rebel said her office serves people from all around the county, but about one-fourth of the people who come into her office are Kansas State University students.
“That doesn’t sound like a lot, but it is,” she said.
Nellie Mae found that 21 percent of undergraduates who have credit cards have balance levels between $3,000 and $7,000, a 61 percent increase from the 2000 study population.
Rebel said she believes one way many students achieve high balances is by using their credit cards on spring break trips. She said a $1,000 trip at a 15.9 percent interest rate, making only minimum payments, will take 15 1/2 years to pay off. She also said that the $1,000 trip will turn into a $2,329 trip with the interest rates.
“I use those numbers as a wake-up call for some students,” she said.
Even though there are high rates of students with high credit card balances, Nellie Mae found that the average credit card debt per student has fallen from $2,748 in 2000 to $2,327 in 2001.
Jeanne Waller, a Kansas State junior in kinesiology, said she uses her credit cards for may reasons and has charged some expensive things to her card she couldn’t pay for right away.
“I just pay what I can that month,” she said. “I have had some expensive things on it — one thing was $1,300.”
Another way many college students get in over their heads with creditors are high interest rates and annual fees, Rebel said.
“Know what they are charging you,” Rebel said. “Watch for sky-high interest rates and monthly fees. You can be losing money just to have a piece of plastic.”
Rebel said some of the main advantages of credit cards include using them in emergencies, cutting back on the need to carry cash, and most importantly, building up good credit. She said many students who apply for credit cards do so because they want to establish good credit, but there are also other ways to do this.
“It can be a good step to building good credit, but you can also do so by paying rent and bills on time, keeping a bank account and keeping steady employment,” Rebel said.
Nellie Mae also found that credit card availability has been on the rise recently. The percent of students with credit cards went up from 67 percent in 1998 to 83 percent in 2001, but the amount of credit cards per student has also been on the rise.
Fishel has gained a credit card each year for the past three years. He said only uses one or two credit cards at a time though.
“I am working on paying one of them off,” he said.
Waller said she has two credit cards and has had them both for two years.
“I got them because I don’t like to carry cash,” she said.
According to Nellie Mae, 54 percent of freshman students and 92 percent of sophomores have at least one credit card.
Rebel said she advises people not to apply for too much credit at once in order to keep them from being surprised with high interest rates and annual fees.
Fishel said he has been happy with his credit decisions and will continue to use credit cards in the future, but wishes he would have done a few things differently.
“I wish I would have taken things a little slower,” he said. “At one point, I was enough in debt that I had to take out a loan to pay it off. I am still paying off the loan.”
Copyright ©2003 Kansas State Collegian via U-Wire
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