Paying With Plastic Could Cause Trouble

Students can charge almost anything - their groceries, their gas and even their beer tab.

But studies show credit card charges can lead to trouble for college students if they fall into the trap of overspending.

And because many students use plastic more than cash, credit card companies and banks aggressively target college students on campus.

Such persuasive tactics are apparent on campuses across the nation, as card issuers appeal to students' weakness for anything free by offering T-shirts, flying discs and mugs in exchange for applying for a credit card.

But some say this sort of promotion is not in the best interest of college students and could lead to lifelong debt if students get into the habit of spending more than they earn.

Oren Milgram is one of the founders of StudentMarket.com, a Web site designed to help students acquire the necessities for campus life - including information about credit.

Milgram said that when he was a college student, he saw a need for a Web site that looked out for students' best interests.

"It's pretty common to find students marketed heavily on campus by credit card marketers," Milgram said. "We feel that's not a good way for students to make educated and responsible decisions."

Milgram said students should be educated about credit use and that on-campus marketing has shown not to be beneficial for students' credit.

A 1998 study by the Public Interest Research Group backs up Milgram's claim.

The survey of students from 15 college campuses across the nation - including large and small, public and private, 4-year residential and 2-year community colleges - reports students who obtain credit cards on campus have higher unpaid balances and therefore worse credit records than those who apply through other methods such as a bank.

But Beth Metzler, director of public relations for Discover Card, said Discover's experience with student card holders has been very positive.

"We do target college students, and our experience with them has been very good," she said. "They have shown to be worthy credit card holders."

Metzler credits this to the efforts Discover makes to inform students about responsible credit use by mailing them booklets and pamphlets with their card. They also limit the amount of credit a student can receive.

But Milgram said when students are lured into getting a credit card from a campus representative, they are not learning about credit before they sign up for a card.

"We want to help students make informed credit decisions because on campus they are not given that opportunity," he said.

The Public Interest study showed that, along with inadequate credit education, on-campus marketing resulted in more students carrying unpaid balances and higher unpaid balances.

Of the students surveyed, more than a quarter carry a balance, either paying as much as they can each month or paying late.

These practices can put students in the hole before they ever begin earning a steady income.

UNC sophomore Holli Valentini said her parents will not let her get a credit card because both her older brother and sister had debt problems in college after abusing their credit limits.

Holli's brother, Dino Valentini, said he got a credit card during his sophomore year at N.C. State University.

Although he had a job and the card was in his name, Dino said he spent more than he made.

"(The credit card) let me live outside my means," he said.

Dino said by the time he graduated, he was about $2,000 in debt.

As a result, Holli said her parents will not let her fall into the same trap, refusing to let her sign up for a credit card.

"They don't want me to get in debt," she said. "It took my brother about four or five years to get out of debt."

It is often difficult for students to get out of debts they run up while in college because the first few years after graduation rarely offer enough financial stability to cover exorbitant spending.

Valentini said the reason it took her brother and sister so long to get out of debt was because it took them a while to start earning enough in their jobs to pay back the credit card companies.

Some students are wary of the credit trap and are careful about charging without the income to pay off their debts.

UNC senior Natalie Carrington said she does not use her credit card on a regular basis.

Instead, Carrington said she reserves her credit use for "special" purchases.

"Sometimes when I'm depressed I like to shop," she said. "And I use my credit card when I don't quite have all the cash."

And as long as plastic continues to extend students' spending limits, credit card companies will keep targeting the college market - something that can lure some students into the credit trap.

The Features Editor can be reached at features@unc.edu.