SEVEN YEARS: That's how long it would take to pay off a credit card balance of just $1,000 given a standard 19 percent interest rate and making the minimum 2.5 percent monthly payment.
Granted, there are many University students who pay off their balance in full every month, but there are also many who let the debt carry over from month to month, even year to year, failing to realize that the $8 pizza they charge today will in the long run cost much more. And while the onus of responsible credit card use ultimately falls on the student, the University could do much more in ensuring its students are both informed about the dangers of credit cards and protected from predatory solicitations.
Nellie Mae, an affiliate of the college loan giant Sallie Mae, conducted a landmark student credit card usage study in 2000. The study found that the average student owned three credit cards and carried an outstanding balance of $2,750 on their credit card.
Ten percent of students carried an astounding $7,000 or more in credit card debt. Students are graduating with ever-increasing amounts of credit card debt, a problem that is often magnified by student loans other substantial expenses incurred by a college education.
Credit cards are often a double-edged sword for college students. First, without guidance, students are often ill-informed of credit card pitfalls such as late fees or even compounding interest, which can lead to unwise charges from the start. Second, having run up hundreds or even thousands of dollars worth of purchases, students simply don't have the income to pay off their outstanding credit obligations.
The evils of credit cards are many and often hidden, but they do offer many benefits when used responsibly. Credit cards can offer security in emergencies as well as reduced need to carry cash.
Most importantly, credit cards offer the opportunity to build a positive credit history which down the road will enable users to buy a car, rent an apartment or even buy a house. Even the shadiest of credit cards (think the guys who come out of the woodwork every August offering free t-shirts on Grounds) are safe as long as they're used responsibly.
Responsible credit card use is often lacking on college campuses. Given this reality, colleges should take a proactive approach in educating students and protecting them from shifty offers.
Unfortunately, the University simply doesn't do enough on either front. But there are some bright spots. For years, the University Bookstore placed "special student offers" for credit cards in their bags in an effort to defray the costs of the bags.
But Jon Kates, Executive Director of the Bookstore, noted that the practice ceased with the most recent shipment of bags and those ubiquitous colored brochures blaring "8.9% INTRO APR" will no longer be found.
Another positive step the University could take would be to ban all on-Grounds credit card solicitors. As mentioned before, every August, tables hawking free t-shirts along with credit cards seem to pepper the University.
University policy clearly delineates that "except for those on official business with the University, no one may solicit the purchase or sale of goods or services on the Grounds of the University." Enforcing this rule and barring solicitors would help prevent students from being drawn in to signing on to credit cards with high late fees and finance charges.
Protecting students from unsavory credit card offers is only part of the equation. The other half is aiding students who already have credit cards (78 percent according to the Nellie Mae study) and, more importantly, those who have substantial credit card debt.
The University's Office of Student Financial Services offers counseling to students and their families with regards to the financial aid process and debt management, but nowhere on their Web site is any information with regards to credit card debt counseling or even an information sheet on the pros and cons of credit cards.
In fact, a Google search restricted to items on the U.Va. domain for "credit card debt or use" turned up only one item: a 1999 initiative by the Madison House Consumer Information Service to distribute educational materials about credit card debt to students.
The University could easily offer a pamphlet to educate students about credit cards and financial management. University Career Services produces a glossy 62-page "Hoos Career Guide" offering advice on resumés, interviews, salaries and networking. Either Student Council or the Vice President for Student Affairs should look into producing a similar but shorter guide that would educate students about topics like compounding interest, credit history, saving and investing or even how to buy car.
Sure, University students upon graduation are leaps and bounds ahead of most college graduates, just owing to the quality of our University. But we should also arm them with real-world financial advice, promote healthy credit card use and stop predatory credit card solicitors on Grounds.
Joe Schilling's column usually appears Tuesday in The Cavalier Daily. He can be reached at jschilling@cavalierdaily.com.
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