Article 96 Student Credit Card Debt, How It Happens
Student credit card debt is a problem that will simply not go away all by itself. This problem will require effort from all sectors, family and parents, the student themselves, the issuers of plastic money, the educational agencies and the government. It should all start at home and I will tell you why in a moment.
By the time the students get to college, they are an easy market that can easily be tapped. There is the fantasy of easy money that the credit card companies are good at marketing. Then with the students, who are financially naive and expect high future earning, can easily fall trap into advertisements of easy money.
This is not the only factor that contributes to the vulnerabilities that lead to the student credit card debt. Another factor that contributes to the student credit card debt is that most of them have not had the necessary education to prepare them for the world of finance.
The way the colleges and universities invited the credit card issuers due to added revenue they receive from it also play a role to this problem. At least now most have policies that restrict the activities of the credit card companies. Some are even requiring classes where the students receive lessons on consumer and personal finances. The government is also trying to help by formulating some regulations that will limit fees of the issuers.
When they hit college, most students really do not have the know-how on credit card management and other stuff related to personal finances. This is where this website will be helpful for we will walk you through the ins and outs of personal finances and how to meet the pitfalls that could be lurking around the corners.
The "Consolidated Credit Counseling Services, Inc." report that among high school students, only 15% take a class on personal finance which is a darn shame because there is a non-profit organization called the "Jump$tart Coalition for Personal Financial Literacy" that helps promote financial literacy starting from kindergarten all the way to Grade 12.
This brings us to the problem where some parents really do not talk about finances with their kids or if they do, the kids do not listen. The kids just think this is one of those mumbo-jumbos created by the adult world to make their life miserable, not knowing that down the road they will truly be miserable if they do not listen.
Parents do have to talk to their kids about the rights and the corresponding responsibilities that come with owning a credit card. They really have to educate their kids in this regard to avoid the financial trap that await these kids in college. This should be done consistently starting as early as possible in a non-threatening way so the young will not get put off by the knowledge you will impart to them. Here are some tips:
First and foremost, be a good example by showing diligence in buying things wisely and paying promptly.
As soon as the child is mature enough, getting a credit card that you will co-sign with him can reap dividends later on. There are two schools of thought in this regard. Some experts say to do it as early as possible. Others say to wait till the third or fourth year of college which I do not accept as true because the students are inundated with credit card offers as soon as they arrive in college.
The credit card you co-sign should be one with no annual fee and with a low limit.
Talk to the child about the terms of agreement with the issuers like the interest rate on purchases and cash advances.
Have him write down the expenses and review these and the statement every month.
Discuss the finance charges if the balance is not paid in full like the interest, penalties, fees and other ramifications including the impact it will have on one's credit report.
Discussion with the student should also involve some psychological aspects like resisting the lure of advertisements and free stuff. The free t-shirt that came with signing up for a credit card could cost one hundreds of dollars in the long run. Learning also about want and need will give one a sound perspective of money that will make them avoid the problems of student credit card debt.
By Roger Guzman, M.D. and Evelyn Guzman
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