By Alyson St. Amand
College is the time when students get themselves into the most financial debt. Kristen Bratko, a senior history major, got her first credit card from Visa simply because she did not need to have a co-signer to obtain it.
The trouble begins.
The company offered this as a perk to students accepted to a four-year accredited school. Bratko said that in the beginning, she planned on using her card only for school expenses such as books, sometimes for food or in case of a specific emergency.
However, within two years Bratko’s balance on her Visa had climbed to $4,300, and that was not all that she owed. Bratko’s MasterCard balance had escalated to $800, her Express card to $800 and a Victoria’s Secret card to $500.
Bratko said the spending started at the beginning of her third year at Northeastern.
“I was working downtown with an hour ‘shopping break,’ and I think that is what put me down,” said Bratko. She began using her credit card for personal use, charging everything from clothes and purses, to dining out.
“I usually only spent $50 on my credit cards at a time, but that would be about two to three times a week,” Bratko said. “I knew that I was starting to get in over my head.”
Fortunately for Bratko, the threat of looming student loans finally pushed her to begin to control and consolidate her debt.
Other college students all over the country are also realizing their mounting credit card debts before it is too late. What they lack is the financial knowledge required to keep their monthly payments to a minimum.
According to a 2002 study conducted by Nellie Mae on undergraduate students and credit cards, for many students entering college today, their first credit experience is with a credit card, whereas 10 years ago it was through a student loan.
Cardweb.com reported the national average credit card debt of a student when they graduate is $3,500. The reasons for these rapidly increasing numbers are not just the result of American consumerism, but underlying circumstances on both the part of the credit card companies and the holder.
Another student said that when she spends money with her two credit cards she has no concept of having to make monthly payments.
“I find myself extremely lucky that while I am in college my parents are willing to support me financially and pay for my credit cards,” said Selene Neuburg, a sophomore theater major. “I am left with having no idea of how the finance charges really work.”
Peter Bielagus, fin-ancial author of “Getting Loaded,” said there is a pressure to spend a lot of money during the college years.
“You really have all this pressure to live like it is tomorrow and credit card companies are happy to extend you a line of credit that is well beyond your means,” Bielagus said.
If it means business, credit card companies will allow huge amounts of money to be borrowed because they know that students may only be able to pay the minimum payments and they can continue to collect mounting interest.
Credit card companies are finding it easy to feed off of students who are unfamiliar with finance. According to 101 Financial Lessons, an online newsletter that teaches financial concepts, only 10 percent of all schools in America teach financial management.
Northeastern University did offer a course called Personal Finance to undergraduate students, but it was done away with under the semester system, according to Kathy Musker, administrative assistant for the college of business.
The Personal Finance course is offered to graduate students in the summer, but Musker said that the business department is not sure if it will continue to be offered.
Michael Benson, Student Government Association Vice-President for Financial Affairs, thinks that Northeasten does not offer enough financial resources and assistance to its students.
“In the financial area there are very few general forms that will educate the student body as to the best and most effective ways to use credit, invest in stock and really understand the broad financial arena that students will need in years to come,” Benson said.
Paul Bolster, professor and coordinator of finance at Northeastern, agrees. He said Northeastern could certainly sponsor workshops that teach basic financial survival skills to students.
“There are a lot of students sitting on thousands of dollars on 18 percent debt and they only pay the minimum every month … about one and a half percent on that debt,” Bolster said.
“When condoms are handed out in schools, every single student goes through sex education,” Bielagus said. “In comparison, handing out credit cards without any sort of financial education can be dangerous.”
How to avoid credit card pain: The web site of the California Society of Certified Public Accountants (CalCPA) posts what students do not know about credit cards can hurt them. * Be aware of teaser rates that companies offer to attract new students. * Stick with one credit card that you pay in full and on time every month. Paying only the minimum payments can stretch out what you owe over several years. * Avoid cash advances as the interest rates may be much higher. * Do not exceed your credit limit. * Check your statements carefully. * Report lost or stolen items immediately and protect all personal information.
Financial web site, Bankrate.com, lists key questions that students should ask before getting a credit card.
* Is there an introductory rate when you first get the card? If so, how much is it and how long will it last? * What will the regular rate be? * Are there application, process, annual, late, over-the-limit, account termination or balance transfer fees? * When and how can variable or fixed rates be changed? * How long until interest is applied? * If my contract changes or if I go over my spending limit how will I be informed? * Find out what the credit card company will do if you have trouble making a payment.
