College students are running up an alarmingly large amount of credit card debt these days and it is only increasing with the passage of time. The average undergraduate student carries $2,500 in credit card debt, and when they graduate from college they begin their new lives with debt that they can't pay.
Students figure "I'll live like I want to now and then when I get a job, it will be easy to pay it back." This is often not the case.
Lower-than-expected salaries, plus higher-than-expected living expenses and hefty student loan payments, make handling credit card debt all the more difficult for students and recent graduates.
The worst part about college students having so much credit card debt is that it takes so long to pay it off. Even if an individual is able to make the minimum payments, it would take more than 12 years and $1,115 in interest to pay off a $1,000 bill on a card with an 18 percent annual rate.
If students fall behind in their payments, they get slammed with high late fees. And it's easy for things to get out of hand.
Of course, there are two sides to this story. Most college students start out with little or no credit. Having a credit card seems like a good idea so they can start building a credit history in anticipation of owning a new, or better, car and some day their own home. But if they haven't been warned of the dangers of using credit cards or are especially naive, this could be a bad move.
Credit card debt for college students affects many aspects of their college lives. They can't pay their bills regularly and find themselves short of cash. Plus, it can affect their ability to secure a student loan, which can be crucial with ever-rising tuition rates.
Parents should beware of putting their college student on their own credit cards as an authorized user as the same debt can pile up under the parents' names and cause some serious credit problems for them.
Armed with the right information, many students are able to establish credit and steer clear of card debt. Even though college students do carry credit card debt, 54 percent of them pay off their credit card balances every month.
Most tend to be responsible and use the card wisely.
However, some don't and they're getting into trouble. If a person makes it through 18 years of life without any financial wherewithal, it's very difficult to change their behavior and that's why it's so important that parents speak to their children about money management.
To keep a college student out of credit card debt, the key is to teach them money management skills before handing them a credit card.
Gordon Putnam is a credit repair expert with Utah Credit Alliance, which specializes in credit repair and boosting credit scores. You can find him on the web at www.utahcreditalliance.com.