More Students Are Falling Into Credit Card Debt

Debt-related problems such as canceled credit cards and late payment fees are hitting Americans at a younger age as credit card issuers have expanded their marketing efforts to college students, a consumer group charged Thursday.

Four out of five college students have at least one credit card, and 48% have paid a late fee for a missed payment, according to a survey by the California Public Interest Research Group. An additional 7% of students have had a card canceled because of delinquent payments, said CalPIRG consumer advocate Janine Benner, whose group surveyed 460 college students nationally.

“Without a job and mounting bills, [students] fall into a credit card trap they can’t recover from,” Benner said at a news conference at UCLA. “Credit card companies have no business targeting students. It’s manipulative and deceitful.”

Credit card issuers, however, say college students have proven to be responsible customers and that many are employed. Because so many students are living away from home, the comfort of having a card for emergencies or travel purposes also may entice students to apply for a card, said Maria Mendler, a Citibank spokeswoman.

“We encourage college students to use credit cards responsibly,” Mendler said. “Oftentimes, they are more aware of their finances than other customers.”

Credit card issuers have found that consumers tend to remain loyal to the first company that gives them a credit card, which has led to a rise in on-campus credit card marketing, analysts say. The percentage of college students with at least one credit card rose from 67% in 1998 to 78% last year, while the average balance carried increased from $1,879 to $2,748 during that time, according to student lender Nellie Mae.

That doesn’t mean college students are ready for the financial burden credit cards can carry, said Greg McBride, a financial analyst with Bankrate.com, an online consumer finance service. Often, they rush through applications without reading about all of the fees, he said.

“Their lifestyle encourages them to get a credit card,” he said. “It also makes them more prone to debt.”

Consumer advocates say increased credit card marketing to college students is leading to a rising tide of bankruptcies among young adults. Nearly 5% of bankruptcies in 1998 were filed by people ages 25 or younger, up from 1% in 1995, according to the American Bankruptcy Institute.

Credit card pitches have become ubiquitous at colleges, with 58% of students CalPIRG surveyed saying they found solicitors set up on campus for two days or more during the first two months of the school year. Eighty percent reported they signed up for a card simply to receive free goodies, such as T-shirts, candy bars and long-distance minutes, offered by the companies.

Nick Lazzarini, a UCLA freshman who received his first credit card last summer, said he had 10 pre-approval offers for credit cards before he even stepped on campus. He watched as students signed up for applications by the dozens.

“It’s crazy,” said Lazzarini, adding that he pays his monthly balance regularly. “Solicitors would tell students that they needed a certain amount of applicants just to meet quota. The students would do it because they felt sorry for the guys.”

Assemblyman Paul Koretz (D-West Hollywood), has sponsored a bill that would cap credit limits and penalties on credit cards marketed to students.