Are College Students Ready for Credit Cards?

• Position: Brief Article

In a very short time, thousands of students will head off to their first year of college, where they will experience the many rituals of collegiate life: trying to figure out what classes to take and which parties to attend, adjusting to dorm life, meeting new friends, going to football games, and getting their first credit card. Consolidated Credit Counseling Services, Inc. (CCCS), points out that 80% of colleges and universities permit some form of on-campus credit card solicitation, and nearly 80% of full-time undergraduates have credit cards. (Students can enroll without a co-signer if they are over 18 years old.) Despite the fact that they have little income or credit history, such solicitation is not surprising. Roughly three in four students keep the first credit card they receive for 15 years or longer.

The downside to this solicitation is that the average outstanding balance is $2,226, and 10% of college students have rung up outstanding balances over $7,000. Some have been forced to drop out of school because of debt problems that were brought on by the misuse of credit cards.

Credit cards can have their place in a college student's life. They can be useful for emergencies and help the student learn about the proper use of credit and establish a credit history (if the card is in his or her name). To assist their offspring in the most appropriate use of credit cards during their school years--and later--here are some tips for parents:

Educate them about credit cards. According to CCCS, 44% of students understand the word "budget," 34% comprehend the concept of buying on credit, and a mere eight percent have a knowledge of compound interest. Like numerous adults, they don't grasp the often-expensive issues of grace periods, late payments, finance charges, and minimum payments. Students also need to learn about the importance of building and keeping a good credit history since it affects their chances of getting future loans and even their ability to find a job.

Keep just one card. Even if the credit limit for a newly...