Credit card use among students at an urban university with a large commuter population: preliminary results.

Author:Anderson, Cynthia E.

    "College students are part of a very privileged class these days. They are held to a different standard than the rest of us. College students with no job, no assets, no income, no credit history, and no means of supporting themselves are eligible for unsecured credit--and in some cases quite a bit of credit," (Susswein, 1995, 21).

    According to the most recent NellieMae report in 2005, there is good news and bad news for students with credit cards. Seventy-six percent of undergraduates began the school year with a credit card, an eight percent decrease from 2001. Their average balance was $2,169, a seven percent reduction from 2001 and the lowest balance reported since 1998. It seems that the freshman year in college is when most (56 percent) get their first credit card. As for the bad news, as the students progress through college so too does their credit-card usage, with 91 percent of seniors having a credit card compared to only 42 percent of freshmen. The report also indicated that 56 percent of the seniors carry four or more credit cards with an average balance of $2,864. Only 24 percent of the students said that they paid their credit cards off each month, and 11 percent are making less than minimum payments on their debt.

    The report continues that most of them got their credit cards through mail solicitation and use them most often for school supplies, textbooks, and food. The students also do not have a clear idea of how much their outstanding balances are on their cards. Students from the northeast have the lowest credit-card balances while students from the midwest have the highest. Credit-card usage by college students is a concern and worthy of investigation because of the mounting debt college students face but also because of the debt they incur from increasing tuition costs at both public and private institutions. Colleges are graduating a class of citizens with overwhelming debt into a work environment in a suffering economy with fewer and fewer high-paying careers.


    Credit-card usage by college students has been the subject of interest with the popular press (e.g., Palmer, 2007 and Brandon, 2007) as well as of interest to several disciplines in the academy. Warwick and Mansfield (2000) found that the majority of students did not know the interest rate that they were paying on their credit card. However, almost half of them did know their credit-card balance and credit limit. Kenner, Mize, Gilbert, and Saracino found that "students are in need of consumer knowledge information prior to entering college and incurring credit-card debt," (Kenner et al., 2001, 76). They (2001) found that college students were particularly ignorant about interest rates, credit balances, minimum payments, and future ability to borrow and acquire additional credit. Jones (2005) found that freshmen students knew very little about credit, and that female students and non-white students scored lower than their counterparts.

    Several researchers have investigated why college students' are so eager to sink into debt. Davies and Lea (1995) found that students were a relatively low-income group with a highly tolerant attitude toward their high debt. They (1995) concluded that students tend to come from prosperous socioeconomic groups, and they view their low incomes as temporary so they are using credit cards to sustain the lifestyle that was provided for them prior to college and that they expect upon graduation. Hayhoe, Leach, Allen, and Edwards (2005) found that college students without credit scored higher on the cognitive and behavioral aspects while the students with credit cards scored higher on the affective component of attitudes toward credit. They (2005) also found that students without credit cards had more imagined interactions with their parents about credit than the students with credit cards.

    Norvilitis, Szablicki, and Wilson (2003) found that students who sought credit cards from on-campus sources had greater credit-card debt than students who received their credit cards from other sources. The students were under the mistaken perception that their colleges supported these companies. They (2003) also found that most of the students with credit-card debt felt that the debt was transitory and would be paid off once they were graduated. The authors (2003) felt that a need existed to educate college students about the long-term consequences of debt.

    McCall and Eckrich (2006) focused on the gender of the college students and their attitudes toward credit and found that female students reported shopping more, having more credit cards, and repaying debt of greater importance than male students. Hayhoe, Leach, and Turner (1999) looked at students who had four or more credit cards compared to students with less than four credit cards and found nine variables that were significant predictors of students' use of credit: a high affective attitude credit attitude (high score from using credit cards), age, the cognitive credit attitude (consequence of using credit cards), gender, having taken a course in personal finance, less likely to borrow from friends or relatives, the retention money attitude (low score), use of money as a reward, and preparing a list before shopping.

    Pinto, Parente, and Palmer (2000) found no differences between those college students who scored high or low on the materialism scale on either the number of cards or the average balance owed. However, they did find that the low-scoring materialism group used their credit cards less frequently, spent less, had lower outstanding balances, and did not attempt to justify their use of the cards (e.g., method of identification, need to build credit history, and definition of necessity versus luxury) in the same way as the high-scoring materialism group. Mansfield, Pinto, and Parente (2003) compared college students who paid off their credit cards monthly versus those students who carried forward a balance, and they found a significant difference between the two groups on self control and specifically on the impulsivity subscale suggesting that college students may be living beyond their means and that credit makes it easier for them to act on impulse purchases. Pinto, Mansfield, and Parente (2004) looked at students who paid off their credit cards monthly versus those students who carried a balance forward and found no significant differences between the two groups based on locus of control. However, they did find that the heavy users of credit cards recognized that negative consequences of using their credit cards, but it did not limit their usage. Joo, Grable, and Bagwell (2003) did find that the students' ethnic background, their parents' use of credit cards (role models), their credit card ownership, academic level, money ethic (how much they value money), and locus of control were associated with the students' attitudes toward credit.

    Roberts and Jones (2001) found that credit-card usage does increase compulsive buying. Secondly, they found that power and prestige or status is associated with compulsive buying. Lastly, they found a relationship between compulsive buying and anxiety in that shopping is used to reduce stress, making anxiety both an antecedent and an outcome of compulsive buying.

    In 2003, The Center for Student Affairs Research (CSAR) located at the University of Oklahoma worked closely with the Council on Student Affairs (a group consisting of vice presidents or deans of students affairs in the state of Oklahoma) and the Oklahoma State Regents for Higher Education staff in developing an instrument for assessing significant issues related to credit-card use among college...

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