Credit cards can bring problems on campus

Whether they're used to cover holiday gift purchases or the gas used to get to the shops, credit cards have taken on a central role in most people's lives. The case is no different for younger cardholders. As college students grow fond of the plastic in their wallet, a startling number of them will wrack up an amount of debt that is far from "priceless."

An interview with Beth Jaskiewicz, the senior vice president of marketing at the South Carolina Federal Credit Union, reveals some striking information regarding credit card debt among college students.

By the end of 2007, U.S. households will receive over five billion credit card offers. By estimation, at least twenty percent of those offers will be directed at college students. Since cardholders generally keep the first ones they own, companies heavily target this age group to facilitate customer loyalty as early as possible.

Some other traits that many college students exhibit entail na've notions of social entitlement to material goods and instant gratification. These notions often run counter to one's practice of financial responsibility. However, heavy debt is not a recent phenomenon. Since the baby boomer generation began handling their finances, overall debt has spiked. In 1968, consumers' total credit debt was $8 billion (in current dollars). The current total exceeds $880 billion. By these appearances, one may be led to believe that many children of the baby boomers may not receive ample education regarding financial responsibility.

There are several paths to indebtedness when handling credit cards. One of them is through universal defaulting. When a cardholder is late on a payment (or in default) for one card, not only will that credit provider increase the cardholder's interest rates, but that company will notify others of the default. Consequently, if the companies notified hold the same customer in common, they will increase that person's interest rates regardless his or her payment records with those companies. Universal defaulting policies are usually written in the finer print of the terms of agreement one signs when being issued a card, and students are frequently unaware of this practice.

Universal defaulting has direct consequences when it comes to a cardholder's credit score. Many consequences of having poor credit that are relevant to students include rejections for apartment rentals, auto loans, car insurance, graduate school loans, and professional school admission, and even jobs. If someone is not rejected outright for these things, poor credit can still result in more financially constraining terms; higher down payments may be required for home mortgages and for various loans.

Christmastime is a particularly volatile period for cardholders. Shoppers may enter the holiday season with a good credit reputation, but they may fall victim to "holiday hangover" more easily and quickly than they might expect. While many may expect to be able to pay off their spending debt within a few months, often times they find it more and more difficult to pay off the debt with each passing month. A wiser plan would be to save a certain percentage of money at various points throughout the year and allocate that to a holiday gift fund. As the holiday approaches, one should make a list of gift recipients and how much he or she can afford to spend on each recipient, and then pay in cash.

If it is not obvious already, one can expect to get more credit card offers when approaching this holiday. There are several tips one can take when shopping for credit cards. First, one should consider not the credit card company, but the actual product offer. The introductory interest rate and its duration are of obvious importance. Beyond this, one should look at policies regarding over-limit fees and annual fees if they exist. Many credit cards offer bonus points towards merchandise and airline tickets. Also, One should consider the difference between the annual percentage rate (APR) for cash advances and the APR for purchases.

Online resources that help with comparative credit card shopping include bankrate.com and creditcardassist.com.