Credit card use has both up, down side
Amy Berhow
News Editor
They're convenient. They're easy. They're great for emergencies and they can help you build a credit report. That may be true, but what about the costs and consequences of student debt that some credit card companies aren't telling you about?
Today, more and more college students are falling into the credit card trap.
In fact, student credit card-related debt is a larger problem than previously thought.
According to a study by Georgetown University sociologist Robert Manning on student credit card debt, about 70 percent of undergraduates at 4-year colleges possess at least one credit card. At some colleges and universities, one-fifth of students carry debts of more than $10,000.
The problems with credit card debt usually occur when students get in over their heads with too many cards. Instead of building a good credit record, credit cards and debt become a source of poor credit ratings.
But many of the problems don't stop there.
Unfortunately, student credit card debt can result in a number of very serious long-term consequences.
Bad credit can keep students from purchasing a car, getting housing, receiving telephone service and buying a home. Some students even have a difficult time getting a good job because many employers review credit records.
High debt can cause some students to cut back on their academic course load and increase the time they spend on paid jobs to pay off debts. In some cases, students are forced to drop out of school and go to work full time.
Financial problems aren't the only problems resulting from debt. High debts can cause a number of psychological problems ranging anywhere from stress and anxiety to suicide.
According to a Consumer Advisory by Iowa Attorney General Tom Miller, to avoid debt problems such as these, there are a few tips you should take into consideration if and when you choose to get a credit card.
- Don't give yourself too much credit. If you do get a credit card, determine what you can realistically afford to pay each month for credit purchases, based on your income and expenses. Plan to pay off your bill completely every month.
- Proceed with caution. Don't be seduced into obtaining several credit cards and "maxing-out" on them with a high debt load. Don't use advances on one card to pay down another.
- Avoid the revolving debt trap. Don't think you can avoid trouble just by making the minimum payment. Work hard to pay off the balance completely each month.
Whatever you decide to do, consider whether or not this is the right time for you to get a credit card and risk possible debt. If you do get a card, be very careful when selecting a card that is right for you and managing your credit card account.
Credit card use by students on the rise
Billie Moorehead
Staff Reporter
Credit card use is rising, while the age of the average credit card holder declines. Many students at NIACC use credit cards for such expenses as books and luxury items.
Freshman Amy Hutzel from Manly owns a credit card. "It gives (students) an opportunity to spend money when they need it," Hutzel said. "I bought my books with mine."
College students are very familiar with the efforts to hook them up with credit card companies.
"I always get stuff in the mail. They hand out applications (for credit cards) in the bookstore bag," Hutzel said.
College Bookstore manager Deb Robinson offers advice to college students who use credit cards.
"Pay it off at the end of the month, that interest will just eat you alive," Robinson said.
About one-third to a half of NIACC students pay for their books with a credit card, either with their own credit card, or a parent's credit card according to Robinson.
Parents often offer good advice when it comes to credit and managing money.
"They (parents) know what's coming in the mail for their kids," Hutzel said.
Fast spending power also attracts some NIACC students to using a credit card. Freshman Jesse Huston from Lake Mills said he applied for a credit card.
"(I applied for one) so I could order stuff," Huston said. "I get all sorts of stuff in the mail."
Right now Huston said he makes minimum payments on his card until he gets a good job.
Sophomore Hope Shultz from Esterville said she does not own a credit card.
"I don't want to see myself get into debt," Shultz said. "They (credit card companies) know that sometimes we (college students) need the money, some college students just aren't very responsible yet."
Shultz's advice: "Avoid credit cards as long as you can."
Credit can vary for credit institutions
Callie Weigel
Feature Editor
Although most financial institutions offer credit cards to their customers, the location of the credit card issuer, the lending policies of that issuer, and level of cardholder assistance provided may vary.
A phone call to three area institutions indicated that First Citizen's National Bank of Mason City uses an out of state issuer, MBNA, of Delaware. Similarily, Clear Lake Bank and Trust uses Elan Credit Card Services, a Minneapolis-based credit card issuer.
Only one institution interviewed issued its own credit card, Wells Fargo Bank of Mason City.
As one might expect, credit approval and lending policy for First Citizen's National Bank and Clear Lake Bank & Trust is not made locally, but instead by the out of state card issuer.
However, credit decision for Wells Fargo student applications are made locally, Traci Rohrer, Mason City Wells Fargo Store manager, said.
Credit card applications are part of a student packet of bank services offered by Wells Fargo Bank.
Credit limits on student cards usually do not exceed $500, Rohrer said. Student credit card applicants at Wells Fargo must be at least 18 years of age, provide a student ID, and may have either no credit history or a positive credit history for consideration.
"It's a nice way to start a credit file for themselves," Rohrer said.
Jennifer Schaefer, internal auditor for Clear Lake Bank & Trust also stated a minimum of age of 18 for their student cerdit card applications.
"Elan (the card issuer) makes credit decisions," Schaefer said of their credit card program. "We don't specifically market to students."
Becky Picard, an Elan Financial Services representative, detailed Elan's student credit card program. "Students must be 18 or older and enrolled in a two or four year accredited college, with satisfactory credit history," Picard said.
Elan student credit card lines begin at $1,000 and income requirements for the applicant vary with their individual credit histories, Picard said.
Students with no adverse credit history, but monthly income of less than $300, need either a substantial deposit relationship or a qualified co-signer to apply.
If the student has an established credit history with no adverse action, income levels requirements range from $300-$500.
Students with no established credit history must earn $500 or more monthly, Picard said.
"Students can have no credit history, we just don't want a negative credit history," Picard said.
As to cardholder assistance between the three institutions, Clear Lake Bank & Trust and First Citizen's National Bank provide toll-free phone numbers for cardholder service from their respective card issuers.
Wells Fargo Bank offers local, as well as, nationwide assistance. "We have our card services center in Des Moines, but our cardholders can get help at any Wells Fargo store nationwide," Rohrer said. "We have two Wells Fargo stores in Mason City."
The Iowa Attorney General's office stated in a public release sent to NIACC that the most common questions pertaining to credit cards are about fees and charges.
"These include over-the-limit, close-out, and 'non-use' fees," the release said.
"Consumers have questions about high interest rates generally, including high 'penalty' interest rates." The Attorney General's Office receives consumer complaints mainly about four practices of some card-issuers:
- Quoting a pay-out figure over the phone, then failing to accept that amount as payment in full.
- Failing to respond to written billing disputes.
- Making it diffcult to close accounts.
- Making misleading offers for cash advances, checks or interest rates.
Iowa generally does not regulate out-of-state banks. Cardholders may need to contact federal law makers and the bank's regulators for out-of-state card issuer complaints, the release said.
If you wish to register complaints about credit card fees, charges, and other practices, cardholders may wish to call or write a representative in Congress or to complain to the agency which regulates most of these card issuers-the Comptroller of Currency.
The address for the latter is, Comptroller of Currency, Customer Assistance Unit, 1301 McKinney, Suite 3710, Houston, Texas, 77010. The web site address is
http://www.occ.treas.gov/customer.htm. The e-mail address is
Customer.Assistance@occ.treas.gov.
How bad it can get if you don't watch those cards
Wade Siskow
For the Logos
A recent study shows that 78% of students own a credit card, and 32% of those students own four or more.
With such a high percentage of young credit card users, it comes as no surprise that credit card debt has become a widespread problem among college students.
Many are finding out how easy it is to fall into debt; and unfortunately, how incredibly difficult it can be to get out.
As is often the case, a student's financial situation only allows him or her to pay off small portions of the debt at a time.
Interest rates and other fees figured in, payment can be a long and difficult process.
To illustrate how difficult paying even a small debt can be, look at a very basic example using a fictional college student, who, like many is a low-income student living in an apartment off-campus.
Aside from paying rent, utilities, and other daily expenses this student is faced with a $500 credit card bill.
After examining his or her financial situation, the student finds that he or she will only be able to make the minimum monthly payment, which in this case is about $25 -- average for a bill of this size.
However, in taking this approach the student must then pay a monthly finance charge in addition to the original bill.
All things considered, it would take this student 25 months to pay off that $500 bill. Altogether, finance charges would total about $110.
Of course, these figures would only be accurate if no further charges were made and no late or over-the-limit fees were incurred.
Now, let's say the original bill was $1,000 and again the student only made the minimum $25 payment.
This time, it would take 66 months (5.5 years) to fully pay the bill. Total finance charges in this case -- about $628.
Sadly, even a $1,000 debt seems insignificant when compared to the average student credit card debt which some studies estimate to be $2,748.
In these cases, its the use or misuse of several credit cards that leads to such a prodigious debt.
And how long would it take paying a $55 (2% of the balance) monthly minimum to pay off a $2,750 debt?
A little over 8.5 years.
But worst of all, at $2,962, fianance charges end up being more than the original amount owed.
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