Black Collegian Career Center

What could be more important than your grade point average in determining your opportunities after college? Your credit report. This report provides information on how you have handled credit in your life, and helps provide potential creditors with information they will use to make their credit-granting decisions. With a negative credit history, it could be nearly impossible for you to rent an apartment, buy a house or car and most importantly—it could prevent you from obtaining your dream job. So how do you develop and maintain a good credit history? By handling credit responsibly, especially your credit cards.

Credit cards. It is nearly impossible to function in today’s society without one. From making airline, car or hotel reservations, to making purchases on the Internet, it is the one essential that makes everyday living easier. And credit card companies are trying to make it easier to get one.

Competition for credit card customers has become extremely intense. Companies are looking for whatever customers they can get, wherever they can get them. Frequently this brings credit card marketers to campus eager to sign up ‘fresh meat.’ They expand their market by signing up new card members, many of whom are barely 18 years old. By signing up more customers earlier, the card companies hope to establish a type of brand loyalty that will carry far into the future.

What better place to start than a college campus? Each year there is a guaranteed new crop of potential customers. In the next few months, students everywhere will be offered free T-shirts, water bottles, long distance, pizza discounts, Frisbees, backpacks, hats, pens—you name it—all in the name of marketing credit cards. However, if many college administrators have their way, these marketers will soon be a thing of the past--along with those annoying little credit card mailers that are stuffed in the bottom of your bag at the campus bookstore.

Several universities have eliminated credit card marketing from their campuses altogether. University of Wisconsin-Madison and Lehigh University in Pennsylvania have both banned marketers. At the University of Iowa, credit card marketing is a large problem on campus due to the volume of requests they receive. Dr. Phillip Jones, vice president for Student Services and dean of students for the University, indicates that "the marketers must be sponsored by a student organization and student organizations use the marketers as fund-raising activities." According to Dr. Jones, The University of Iowa recently turned down funding from a marketer who wanted to put credit card applications in the bags used by the bookstore "because we want to find ways to stop the proliferation of credit card applications on campus."

In March of this year, the United States House of Representatives introduced H.R.900, the Consumer Credit Card Protection Amendments of 1999. Section 7 of this bill addresses the issuance of credit cards to underage consumers. One of the goals is to prevent credit cards from being issued to a consumer under age 21 without proof of independent income to repay the debt or the signature of a parent or guardian, similar to a co-signer on a loan.

As it stands now, many credit cards are issued to students with no proof of income. In general, all students need to do is provide proof that they are a full-time student and they will receive a card. A student can get a card on his or her way between classes. Need a VISA card? They will sign you up in the student center. Want a MasterCard? You can pick one up on your way to chemistry. But, do you ever consider how this easy credit is going to get paid? Not usually. You reason that you have a part-time job, and will only use the card for "real" emergencies—like books or if you suddenly need to go home.

You may even say to yourself that you will pay the bill as soon as it comes in. When it arrives, it lists the total amount you owe, and you almost fall over when you see how often your promise of ‘just this once’ turned into a bit of a spending spree. As you are wondering for the first time how you are going to pay for this, your eyes catch the little box that shows "minimum payment of $20." "$20?! That’s it?" So you send in that minimum monthly payment—for every card you have managed to obtain in the last three years, and figure as long as you are making the minimum payment, you figure you are doing okay.

However, according to bankrate.com, if you have a $1,000 balance on a credit card with 18 percent interest, and you merely pay the minimum balance every month, it could take you over 12 years to pay off this debt. And what did you buy with that $1,000 debt you racked up? Did you really use it for books? Was it the latest CDs? Or maybe that outfit you just had to have? Or was it the last-minute Spring Break getaway? Think about it the next time you are tempted: do you really want to spend the next 12 years paying for a $15 CD or $40 sweater?

According to a study released earlier this year by the Consumer Federation of America, expanding credit card debt is quickly becoming one of the most severe threats to academic success on college campuses. This study, conducted by sociologist Dr. Robert Manning, a visiting professor at Georgetown University, suggests that credit card marketing "on college campuses poses a greater threat than alcohol or sexually transmitted diseases."

If you have already racked up substantial credit card debt, you are not alone. Dr. Manning’s study estimates that nearly 20 percent of students may have credit card debt in excess of $10,000. He goes on to indicate that many of the actual numbers are difficult to obtain due to refinancing and debt consolidation loans. Which brings up another issue—that of using student loans to pay for credit card debt. How often does this happen? More often than you might imagine.

Student loans are financing for you to pay college expenses today based on your ability to pay tomorrow. This credit is extended to you without proof of income, but it is to help you obtain the knowledge and skills you need to increase your lifetime earning potential. This credit—which is designed to help you prepare for your future—may take you up to 30 years to repay. When you think about the fact that you will generally graduate from college with well over $10,000 in student loan debt alone, you might want to reconsider running up your credit card for that ‘must have’ item at the mall.

College students and administrators have weighed in on the effect of aggressive card marketing on campus. In many instances, it has led to depression and students leaving school. Of the students I spoke with, many of them were responsible for paying their own bills, and others had their parents to pay off their bills. Some students used their cards only for emergencies, or for things they wanted, and were able to pay off their bills easily. And then, there were the students who used the cards for survival, due to a lost job, or family situation and just got in over their heads.

Malik*, a recent graduate, indicated he got into trouble as a sophomore, and is still paying for it. He only had to prove he was a full-time student and the next thing he knew, there were credit cards in his mailbox. He received the following cards and credit limits: VISA at $500, Sears at $900, JCPenney’s at $500 and Discover at $1,000. That is nearly $3,000 in credit for someone who did not have a job, or any visible means of support! What’s wrong with this picture?

He used them mostly for emergencies, also for family things. But, then it became tempting to use them for stuff he or his girlfriend wanted like CDs, clothes, and Spring Break. He was fine paying the minimum monthly bill until a problem arose and his money got tight. Then he looked up and was several thousand dollars in debt. And, creditors were calling all the time. He was already working two jobs, so he did what he could to pay what he could. But, he feels that due to the interest that accrued, he just never recovered from those first missed payments.

After graduation, he was fortunate to get a good-paying job, but then his car broke down. He needed to buy a new one, but was unable to because his credit was damaged from his college spending habits. This put him in the terrible position of having to ask his parents to co-sign on a car loan. Included in the advice he gives to students, is learn how to handle your money. "Credit cards are an evil necessity of today’s society. It is hard to get by without one, but when you get it, be careful how you use it. The plastic is easier to spend than cash because you don’t really see it leave your pocket. It’s very deceptive in the fact that hundreds of dollars can be charged, yet a small monthly fee is required and you can’t get out of it at all…credit cards are dangerous when used without experience."

Terry* got her first card as a freshman at 17 or 18. She was ‘cold-called’ because she was ‘fresh meat’ and fell for the company’s ‘just-because-you-have-it-doesn’t-mean-you-have-to-use-it" line. She used it for small purchases and was on top of things until she ran into difficulty one summer and had to use it to buy food and pay rent until she could get a job. As for getting another credit card, she would not even get one if she had the resources to pay on time and in full.

Andy Jacob is president of Worldwide Financial Services in Southfield, Michigan, where he sees a lot of people with current and past credit problems. His company, founded in 1990, specializes in helping people with credit problems by providing them with second chances to have a financial life. "Credit cards are so easily accessible these days. Credit card companies are making cards available much earlier than even five years ago."

John* used to be one of those credit card marketers, who would cold-call you over the phone. He marketed cards for several major companies and was amazed by the fact that people he did not know would actually get a card ‘just like that’ over the phone without ever meeting him. He could sell eight to 10 cards per hour by cold-calling alone. These consumers rarely asked for any type of documentation before agreeing to the credit terms.

Tiffany* is currently going through what she called a ‘credit meltdown’. When I caught up with her, she had just destroyed one of her major bankcards and was working on paying the balances on several department store cards. She said, "…the VISA has been cut up and I continue to tear up each offer that comes in. As for the store cards, I need to pay those off quick. They offered me some great deal for signing up and I got sucked in. Luckily, those can be used in only one spot, and the limits they offer are small."

In speaking with various university administrators, there was agreement that students are considered adults. Some feel that universities should not necessarily operate in the role of parents. Their goal is to teach students and educational programs should include some life skills training surrounding personal financial planning. The University of Iowa is currently developing ways to assist students with their finances, including sponsoring a successful series of financial management workshops for women offered by the Women’s Resource and Action Center. This program will soon expand to reach other student populations. Within the next year, money management information will be distributed with every credit card application.

1. Budget, budget, budget!
2. When you get a card, be careful how you use it.
3. Never let the balance of a credit card exceed how much you make in a month.
4. Always try to pay off the balance right away to avoid interest payments.
5. Pay for as many things in cash as possible.
6. Avoid using it for cash advances ... it really adds up.
7. Have only one major credit card. That way, you can control your spending easier.
8. Don’t fall for the easy sell of credit card companies, including private store cards.
9. Make sure you use your credit cards for emergencies. New clothes for a party do not count as an emergency, but car repairs do.
10. Credit cards are not for the weak of will or the low of funds: if you don’t have the money, don’t spend the money!

1. Do not have more than one credit card.
2. Make sure you read the fine print and understand it!
3. Check on the interest rate and annual fee and try to get the best deal.
4. Check on the reputation of the firm.
5. If you must travel abroad, get a card that you can use in case of an emergency. The fee is worth it. But remember not to use the card unless you have an emergency!
6. Be sure to check all your purchases
7. Protect your credit.

The major credit card issuers—VISA, American Express and MasterCard—all have information available about their credit cards online. They have even created special ‘student friendly’ locations on their sites which are designed to help you determine what type of card you should get, how to budget and stay financially sane. If you are considering getting a card, or would like more information about your present card, you may want to check these sites out. Be sure to read the fine print!

What if you are already experiencing a ‘credit meltdown’? First, don’t panic. Second, create a budget with a realistic picture of your monthly income and expenses. Figure out how much you really owe and to whom. Set up your own payment plan with a goal. For example, if you owe $500 to VISA, promise yourself to pay a minimum of $50 per month until you get it paid off. When it is paid off, use it only for emergencies. You should also be proactive and call your creditors before they start calling you. Let them know you are having difficulty making payments and that you can only afford to pay a certain amount per month. You will send that to them every month. Then do it. They may not like receiving less than what they ask for, but it is better than avoiding your payment obligations altogether.

Andy Jacob advises that "the quicker someone takes action, the better it is. . .Don’t brush your credit problems under the rug…the best time to take action is today." He also recommends that students make a simple budget, figuring out how much is coming in and how much is going out. "It may take hard work to follow a budget, but it can be done." If you feel you are in way over your head, with creditors calling for their money, check out what confidential student crisis services are available on your campus or contact a local credit counseling service to help you out. For a fee, the credit counseling services will allow you to write one check to them each month, and they will negotiate with and pay your creditors from that amount. In many instances, creditors will accept a lower payment amount if they know you are getting help for your situation. Occasionally, they may defer your interest payments so that your balance will not increase. Whatever you do, take care of your credit, and it will be there when you really need it.

Charanne M. Parks is a contributing writer living in New Jersey. She has nearly 10 years of experience developing diversity recruitment and retention programs for universities and corporations.