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It's
so much more than a piece of plastic. In the hands of
a college student, a credit card can be an effective
tool-or a terrific temptation. Easy access to pre-approved
cards and a lack of understanding about the problems
of plastic contribute to many students graduating with
credit problems on their heels. As more and more students
become mired in the muck of credit card debt, the term
"college credit" seems to be taking on a whole
new meaning.
"Easy
Targets"
Credit card companies are targeting your student. In
the late 1980s, they got wise to the fact that the market
was already saturated with working adults paying high
interest on their cards. So, they turned to college
students, banking on their future earning potential
as college graduates and their current desire to experience
the freedom of spending at will. Students are also estimated
to spend over $100 billion each year. Their tendencies
toward brand loyalty promise that they'll keep a college
credit card for many years. MasterCard even did a survey
that found three-fourths of former college students
still holding their first credit card 15 years later.
Easy
to Reach
Marketing credit cards to college students is a rather
simple matter, too. They are easy to reach, from the
fliers in college bookstore bags to student newspaper
ads to the "get free stuff" recruitment booths
in many student unions. Recruitment campaigns have become
even more pervasive as mailboxes are stuffed with bulk
mailing and advertisements galore show up on the Internet.
These marketing ploys seem to pay off for credit card
companies. Students are often sucked in by low introductory
rates. Then, some companies jack up the rates once students
are established customers.
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How Parents Can Help
As a parent, there are some key things you can
do to help your student steer clear of credit
difficulties.
-
Explain the "Grace Period." A credit
card statement may tout a 15-25 day "grace
period" to pay your bill. However, this
may only apply if students don't have a previous
balance on their account. If they do have a
balance, chances are they'll be paying interest
on their new purchases right away.
- Encourage
Students to Pay Up. Paying off credit card balances
is a smart move. This not only avoids interest
accumulation, it also helps students prove to
creditors now and in the future that they are
a good credit risk.
- Talk
About the Practice of "Living Off Your
Credit Card." It may seem convenient to
use credit cards for everything but the benefit
of cash is that it's much easier to keep accurate
tabs on spending. Credit card purchases often
don't show up on a printed bill for a month
and by then, students may have gotten themselves
into trouble.
- Warn
Them to Put the Charge Card Down and Step Away
From the Mall! Recreational shopping is a pastime
of choice for many students. Just encourage
them to know their limits before handing over
their credit card so that peer pressure and
"enjoying the moment" don't lead them
to poor money decisions.
- Ease
Into It. Encourage your student to start off
with a low credit limit to avoid the temptation
of going on wild spending sprees. Have them
get accustomed to using the card for emergencies
only.
- Start
the Practice of Paying on Time. Your student
can avoid late fees by paying on time. Encourage
them to pay their bill as soon as it arrives
so that it's not lost in the shuffle of busy
college life.
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The
"spend now, pay much later" temptation associated
with credit cards is causing many students to get in
over their heads. With your guidance, they can make
safer, smarter choices.
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