credit cards & college students

7/31/2019 Credit Cards & College Students

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COURTESY OF

STATE SENATOR

SHIRLEY L. HUNTLEY

10TH SENATORIAL DISTRICT

Cri Cards & ColgStuens

PRSRT-STD

U.S. POSTAGE

PAIDNEW YORK SENATE

Dear Friend,

Like the cooler weather, the beautiful foliage and the kickoff of football season, young New Yorkersheading off to college is a sure sign that fall has arrived.

Many arrive on campus with the basics: clothes, school supplies, a computerand in some cases, acredit card. While some students use them responsibly, others may make purchases they cannotafford. Even those students who arrive on campus without a credit card can easily obtain one withvery little effort. Lacking some sort of credit education, these young usersunwittingly put their credit future in serious jeopardy.

Because I do not want to see this happen to my young constituents,I have created this brochure detailing the relationship betweencollege students and credit cards, the pitfalls that can occur, andsimple tips for parents and students to get an edge in the creditcard game.

A small piece of plastic can have a big impactpositively or

negativelyon ones credit history. Being smart about credit cardsmay be one of the most important lessons college students learnin their time on campus.

Sincerely,

Senator Shirley L. Huntley10th Senatorial District

New York State SenateAlbany, NY 12247

District Office: 161-10 Jamaica Ave., Suite 504Jamaica, New York 11432 (718) 523-3069

Albany Office: 508 Legislative Office Bldg.Albany, New York 12247 (518) 455-3531

E-mail: [email protected]: huntley.nysenate.gov


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Every fall, New Yorks colleges and universi-ties welcome thousands of incoming freshmento their campuses. Its a safe bet that many

of them will leave school four yearslater with a good education, a col-lege degree, and lots of memories.

And, quite possibly, somethingelse: a ton of credit card debt.

Today, many young profession-als are trying to keep their headsabove water as they struggle topay off thousands (sometimes tensof thousands) of dollars in creditcard debt accumulated in college and,in the process, rehabilitate credit histo-ries that have damaged their chances toget a car, a job, or a home.Of course, credit cards in and of themselves are not bad things;indeed, they are a great way to establish a positive credithistory, which can lead to bigger purchases like automobilesand real estate. There is no doubt in our increasingly paper-less society, credit cards provide exibility and convenience.

More importantly, credit cards offer freedom and indepen-dence, two qualities that appeal to those who are just start-ing out and are looking to establish their own identity. Creditcard companies play into this desire, ooding student mail-boxes with offers or setting up tables where students con-gregate to offer free T-shirts, frisbees and mugs just for ap-plying. Additionally, the Internet makes it easy for studentsto get plastic from the comfort of their own dorm room.

According to a national report, more than 80% of college

students own a credit card and 56% of them have more thanfour.

And what do college students purchase once they gettheir plastic? One study reports that 71% of students pur-chase food with their card; clothing comes next at 68%,and cosmetics/toiletries was third, purchased by 49% ofstudents.

Many rst-time credit cardholderssome with little or noeducation in personal nances

use credit to buy whateverthey want, whenever they

want it. What manyfail to realize is that

this so-called freemoney is actuallya high-nance loanwith a low intro-ductory rate thatballoons after afew months. And if

they pay less thanthe minimum monthly

balanceas 11% ofsurvey respondents said

they didthe nance chargespile up, making it difcult, ifnot impossible, to catch up.

Little wonder, then, that bygraduation day, students willamass an average credit card

debt of $3,173, according tothe national survey. Using thatnumber as a balance on acard with an APR of 16.99%,if a typical graduate mademinimum monthly paymentsof $50, it would take nearly sixyears to pay off that balance,which rockets to more than$3,200, thanks to interest. Put

another way, he or she will stillbe paying for that burger andfries years after the last bite.


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Credit cards can go a long way in helping to establish good credit, so long as they are usedresponsibly. Here are a few simple tips to remember:

Before you ll out a single application, ask yourself three questions: Do I need a creditcard ? Can I afford a credit card? Will I be able to pay off the balance each month? Ifyou can answer yes to each of these questions, then youre ready for a credit card.

Shop around for the best interest rate. Like any class in college, nding the right creditcard requires a little bit of homework. Look for a xed rate, not a low introductory ratethats temporary and wont last. A good place to compare rates is at the New YorkState Department of Financial Services website (www.dfs.ny.gov).

Some credit card companies charge an over-the-limit fee, a late payment fee, a cashadvance fee, and an annual fee just for being a card member. Read the ne print and

look for a card with no or low annual fees.

Settle on one card and pay the balance in full each month and on time.

Request a low credit limit$500 to $1,000 that is sufcient enough foremergencies, yet reduces your temptation to use it for big-ticket items.

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Ohr OptDebit cards are a viable alternative. Like credit cards, debit cards are accepted nearly everywhere.Since funds for purchases are taken directly from the bank account of the cardholder, it helps developscal accountability for spending and budgeting money.

Parents may also want to consider adding a card, with an established credit limit, in their childs nameon their accountmany credit card companies offer this option. Monthly statements help parentskeep track of any purchases made on that card and provide a valuable tool in teaching children abouthow to use credit responsibly.

PROVISIONS OF THE CREDIT CARD ACCOUNTABILITY, RESPONSIBILITY, AND DISCLOSURE

ACT OF 2009 INCLUDE:

Credit card companies are banned from using free giveaways, such as pizza and tee shirts, to enticestudents to sign up for credit cards at on-campus tables.

The law bans credit cards for people under the age of 21 unless they have adult co-signers or show proof thatthey have the means to repay the debts.

Credit card companies are required to get a parents or guardians written permission before raisingcredit limits.

Colleges, universities and alumni associations have to disclose the nature of contracts they sign with creditcard marketers allowing access to student and alumni contract information.

#507 Revised 1/2012


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ReureWhere to go for information on credit cards, interest

rates, and more tips on becoming credit smart:

Nw Yr S Bkg Dprt:www.dfs.ny.gov

U.S. Fl Lry d Etn Commisn:www.mymoney.gov

Frl Tr Commisn:www.ftc.gov

Cur Cr Cug/D Mg Svie:www.moneymanagement.org

Tu Abu Cr:www.truthaboutcredit.org

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