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By Tara Weiss
The Hartford Courant
Wildaliz Bermudez needed to rent a car for her
recent trip to Puerto Rico, but the rental agencies wouldn’t
accept a debit card.
So the Trinity College senior filled out one of
the half-dozen credit-card applications she had received in the
mail, even though it went against her mantra: ``Credit cards are
the devil.’’
Bermudez says she’ll pay off the charges as
soon as possible, and then she’ll cut it up.
Credit counselors wish more college students approached
credit cautiously. But with credit-card companies bombarding students
the moment they arrive on campus — each is offered an average
of eight credit cards during the first week of school, according
to JumpStart Coalition for Personal Financial Literacy —
the offers can be difficult to resist.
Between student loans and credit cards, the average
student graduates $22,000 in debt; $3,000 of that is on credit
cards, according to the student-loan agency Nellie Mae.
Paying such a credit-card debt is tough on a starting
salary. And the effect on a credit rating can last through a person’s
20s and into their 30s, often the time when people try to finance
a car or a home.
Beth Kobliner, author of ``Get a Financial Life:
Personal Finance in Your Twenties and Thirties,’’ offers
this example: Someone who graduates this May with a $3,200 balance,
and who only makes the minimum payment every month, would still
be writing checks to the credit-card company in March 2032 and
would pay $4,000 in interest.
``Unless they’re careful, that college credit
card debt could follow them around for a decade,’’ says
Kobliner. ``You could be paying for that sweater you bought in
college well into your 30s. It can take years or decades to finally
pay for an impulse purchase you make today.’’
And the effects are far-reaching. Those who apply
for mortgages or car loans may not be approved if they have large
debts. If they are approved, they would not be eligible for the
lowest financing rates and could ultimately pay thousands of dollars
more than someone not in debt.
And research shows that people with good credit
histories are better drivers and more responsible employees, so
it can also effect how much one pays in car insurance or whether
you get a job, says Susan Kelly of the Consumer Credit Counseling
Service of Southern New England.
Since general credit cards first became available
in 1950, they’ve gone from being a source of convenience
(not having to carry cash) to enabling people to buy today what
in the past they might have had to save up to purchase.
``The fact that young people are starting in debt
at a younger age, they have to run on the treadmill much faster
to catch up, whereas their parents were saving at their age,’’
says Bob Manning, author of ``Credit Card Nation.’’
``Students really don’t understand the power of credit and
its responsibility. So many people that would have had houses
paid for have two or three mortgages. We’re seeing more and
more people aging into debt.’’
As a result, the number of people under 25 who
have filed for bankruptcy has doubled, Manning said.
Banks ignored college students for years because
they feared students would default on payments. But by the mid-’80s,
financial companies had saturated the market and were looking
for new clients. At first they extended cards only to students
with jobs; then to anyone whose parent would co-sign. Eventually
they began going after seniors with degrees in high-income fields,
such as business students.
In the late ‘80s, as banks learned that students
would use student loans or savings to pay down the debt, they
gradually dropped the requirement that parents co-sign.
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