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Are you a first time credit card owner? If so, this article is written for you. Find out the drawbacks of owning a student credit card that you should take into account?
Credit education is now being implemented in some colleges in the hope that students would become more prepared on managing their finances. In the past years, reports have shown that many students faced credit card debt and some even had to file for bankruptcy because of insurmountable debts.
According to the latest survey by Nellie Mae- a subsidiary of Sallie Mae, the nation's leading student loan company, graduating students each carry an average balance of $8,612 on their credit cards while undergraduates carry about half of that amount.
Financial experts think that credit card companies are also to blame. Why? Credit card issuers realize how big the student market is and it is for this very reason that they introduced credit cards for these young people. The advertisements for student credit cards are clearly meant to entice these youngsters to sign-up for a card. Freshmen students are particularly the favorite target of credit card issuers.
The question is, are these students really ready to handle their own credit? Are they up for the challenges of being a credit card holder? Do these young people really understand the responsibilities and consequences of establishing credit?
According to a survey conducted in April 2008 by The Hartford Financial Services Group, 55% of parents with children ages from 15-24 question the possibility of financial independence. A related study on senior high school students conducted by The Jump$tart Coalition for Financial Literary revealed that on questions regarding fundamental personal finance skills, only 48.3% were answered correctly.
Today, as classes on personal finance management are being introduced in colleges and universities, parents and teachers are hoping for a more positive result. For example, starting January of this year (2008), the National Endowment for Financial Education (NEFE) has also launched the new online financial management course called CashCourse to 126 universities. This online course is designed to help students make wise financial decisions even after they graduated.
Professors also realize that changes need to be made. For instance, in a regular match class, students are taught more than just numbers. They are also taught about the fundamentals on credit cards and loans. Basic terms such as interest rates, APR, transaction fees, repayment terms, closing costs, late penalty, pre-payment penalty, credit report, FICO score etc. – are all discussed to give students a better understanding on how different types of credit work. The differences between good debt and bad debt are also part of the classes.
Learning the basics about credit cards can make a big difference in how students use them. The problem is, because these subjects are not mandatory, only a few students are taking these classes. Not many young people are interested to learn about finances. In fact, teachers observe that those who do not take them are the ones who seem to need those classes the most. Nevertheless, offering personal finance management classes is a first step in reducing cases of debt among students.
As parents, it would be great to encourage
your children to attend these courses.
On the other hand, if you are a student, open your mind and develop your
money-management skills before you even decide to apply for any type credit.
