The presence of credit card company representatives at college orientations is a disturbing sight. Financial greed is the obvious motivation for soliciting young people who may not yet be fully aware of the ramifications of prematurely participating in the questionable offerings of the credit industry.
Using credit cards wisely requires an education in financial dealings. Credit cards come with myriad benefits and penalties wholly dependent on the responsible financial behavior of the card holder. College students, with no previously established credit, are offered high interest rate, annual fee bearing lines of credit.
Most college students do not have stable income or an established credit history. This is the criteria ordinarily used to determine if an individual is creditworthy. Why would credit card companies go against their own rule of thumb for extending credit and court college students? Because it is in their profitable interest to do so.
Credit card companies can afford to gamble. They extend a credit line to a student who is eager to buy and probably has no hope of ever paying off the balance. He will make feeble attempts, and the money goes directly to fees and late charges. If his parents step in and pay the bill for him, it’s a win-win for the credit card company. They make money on the deal. If the student defaults, his credit might be ruined early on in his life, but the credit card company has, no doubt, already recouped the original extended credit amount in late fees and penalties.
Credit card companies offer to extend credit; they do not promise to be ethical. Out of the thousands of college students they entice, a certain percent will have the ability to pay, another percent will be bailed out by parents, and the unfortunate remainder will be under duress and throw good money after bad in late fees and high interest rates. They will also learn, only too quickly, how the friendly credit card company, waving tempting incentives to sign them up, turns ugly and vicious when the inability to pay sets in.
The majority of college students are naive about money management. They go directly from their parent’s home to the college dorm and have not been exposed to budgeting. If they are employed, those jobs are often part time or low paying. They are not yet experienced enough to deal with the intricacies of establishing a good credit history and its impact on their future.
Most college students do not have discretionary income and, as they attempt to meet their needs with limited means, they are becoming educated about financial responsibility. If they desire a credit card, and understand how to use it efficiently, they will seek out the credit card company. The credit card company should not be stalking the student and interfering with the college experience.
When parents send their young adults off to college, they should reiterate the advice they dispensed on the first day of kindergarten; “do not talk to strangers.” Especially strangers bearing credit card applications.