Credit cards widely used, debt follows students

Editor’s Note: This is the first in a two-part series that examines credit cards and student debt at both a national level and at Dartmouth.

For many college students, obtaining credit is as easy as accepting a free T-shirt or slice of pizza. But across the nation more and more students are finding themselves buried in debt after accepting an offer of easy credit, often on their own college campuses.

In 2004, the last year for which statistics were available, three out of every four college students had a credit card, according to student lender Nellie Mae. In addition, over 40 percent of college students possess at least four cards and freshmen carry an average credit card debt of $1,585 while seniors average $2,864.

As the price of college tuition rises, many students have found they lack money for necessary expenditures such as books and food and turn to credit in order to fill in the gaps.

Gianna Chavannes ’07 got her first credit card when she was a freshman and initially only intended to use it for books.

“I didn’t have the money at the time, but I knew I’d be working within the next month and I’d be able pay it off,” Chavannes said.

In addition to targeting consumers like Chavannes, credit card companies also go after financially inexperienced college students who tend to view credit cards as something other than “real money.”

“It’s sort of like using the Dartmouth card, even though we pay for it. It’s like free money. It doesn’t feel like money because it’s just a card,” Chavannes said.

Credit card companies and banks across the country realize that targeting college students makes sense for their bottom line. Not only do college students tend to exceed their credit limit and only make minimum payments, but they also tend to form strong consumer loyalty bonds with their first card issuer.

“It’s a bit of a life event,” said Ed Stolbof, senior vice president of Discover Financial. “They get their first card and tend to stick to it.”

Cynthia Galvez ’09 got her first credit card freshman year and intended to use it to build credit.

“So far I think the bank I am with now is the one I will stay with for life. I’ve only had one conflict and that was solved right away. I’m satisfied with it,” she said.

Credit card issuers and banks also aggressively market to the college demographic to build brand loyalty early on. During visits to college campuses, representatives from these companies often use loud music, flashy giveaways and free food to lure college students to their tables. Many times all students have to do is fill out basic forms before being told that the card and terms will be mailed to them if they are approved.

Several states have already enacted laws to protect college students from overzealous card companies. Twelve states, including New York and California, have passed laws that range from forbidding companies from stepping foot on college property to only allowing them to hand out information.

The General Accounting Office of the United States Congress has also conducted a full report on this trend and has issued guidelines for students to follow before accepting an offer of credit. They advise students to be financially responsible by looking into annual fees, annual percentage rates, grace periods for early bill payment as well as transaction fees and other hidden charges.

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