College Students And Credit Card Debt

Photo Credit: 401(K) 2012

From USA Today:

"The Credit Card Act that took effect 2½ years ago made it much harder for anyone under 21 to get a card. Gone are the days of card issuers racking up scads of new customers on campus by handing out free T-shirts or rewards points for spring break.

"In the old days, if you could fog a mirror you could get a credit card," says Adam Levin, chairman and founder of Credit.com, a San Francisco-based company that provides information about credit products.

Under-21s can still obtain a credit card if they have a qualified co-signer or proof of sufficient income to repay the debt. And card issuers still market aggressively to college students, targeting them with pre-screened mail offers.

That makes parents, as the likeliest co-signers, more involved in the card-or-no-card decision.  Robyn Kahn Federman of Rochester, N.Y., says there's "no way" she'll let either of her two daughters have a credit card at such a financially tender age. Her daughter Sarah, who's 19 and about to start her second year of college, uses Robyn's PayPal card instead. That lets her mom fund the balance and see how she spends her money.

"I don't think anything related to debt belongs in the hands of a college kid," says Federman, communications director of a marketing agency. "The vast majority are not experienced enough with money or cognizant enough of the risks."

Some students, though, have shown they're disciplined enough to have their own card on campus.  Scott Gamm, 20, a junior at New York University's Stern School of Business, used his income from freelance work and blogging to obtain a Visa card and then an American Express card. He charges $200 to $300 on them monthly and pays every bill in full.

But he has friends who obtained three or four cards within a year and now have big debts.  "The more credit you have access to, especially at that young age, the higher the probability you'll use that card to finance fancy clothes, restaurants and entertainment," says Gamm."

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