College students have enough to worry about financially. Interest on student loan payments is perpetually increasing, while unemployment continues to be a major problem. Unfortunately, one of the most profitable industries keeps the low income on their radar, and will eventually make a profit off of students’ demise.
Credit cards are a necessary evil in our country. Paying with plastic is usually necessary when paying for a hotel room, renting a car, and buying items online. A decent credit history is required for most apartment or house rentals. Unfortunately, card companies have many shady policies that hurt uninformed users.
The credit business began in the 1920s to pay for gas in the new invention of the automobile. Bank of America created the first bank-run credit card in 1958, which later merged into Visa. The credit card business didn’t turn into a behemoth until the 1980s when Citibank increased the interest rates in an effort to boost profits. The companies eliminated a limit on the interest rate, which can fluctuate from month to month, depending on your credit history.
We all say that we are going to only use the cards for an emergency – until we decide that we are really in the mood for sushi, or we really need that $100 dress at Nordstrom’s. The purchases pile up, and at the end of the month we can only afford the minimum payment. The companies can then raise the interest rates, making a profit as a result. Even if you pay off your credit card on time, if you lapse in any other payments, such as car or rent, the companies can increase your interest rate.
The credit card companies target college students because they are most likely to be unemployed and less likely to know about financial management. Many businesses offer deals to consumers if they sign up for their corporate credit card. We all see these companies at the tables outside Smith Memorial Student Union, especially when school starts. Every event with outside vendors usually includes at least one credit card company. Students receive an obscene amount of credit card applications per year.
When I graduated from college the first time, I quit receiving the weekly application for credit cards. I can’t remember receiving any applications when I was working full time. It all changed when I went back to school. Last week alone, I received three applications, stating I was pre-approved for their card. Although it is a compliment to think that I am pre-approved for something, applying for a credit card is not a good activity to participate in if you are unemployed and living off student loans.
Although not all college students use their credit cards irresponsibly, statistics paint a startling picture. A study by Robert D. Manning, author of “Credit Card Nation: The Consequences of America’s Addiction to Credit,” found that more than half of students with credit cards maxed them out within their first year of college. Seventy-five percent of students used student loans to pay off their credit debt. It doesn’t just hit the college students, either. Over 100 million Americans are in debt over their credit cards.
Credit cards are useful if they are used wisely, especially if you are able to pay off the full balance at the end of every month. Good credit scores can mean the difference between staying in a nice apartment versus staying in a pay-by-the-week hotel room. Many of us would like to buy a house someday, and a good credit history is necessary for that to happen.
It is best to wait until you are financially stable to apply for a credit card. This sounds like pure common sense, but it’s hard to say no when you are pre-approved for $10,000 of credit.
Credit card companies need to stop targeting college students as customers. The business preys upon uninformed students who are not necessarily inclined to use the cards in a sensible manner. Credit debt will be wherever you want to be. Use the plastic responsibly.