Charge it on the plastic, and worry about it later. When the time comes, however, many college students cannot pay off their credit card bill. Some pay only the minimum balance, and after a while, can accumulate significant debt.
Credit cards can be a valuable resource if used correctly and paid off on time. Yet they can also become a huge burden, especially when placed in the hands of financially troubled college students who could wind up paying off debt for years.
Are the credit card companies to blame for targeting these young adults who do not realize the financial trouble they can potentially get into? Or must students possess the responsibility and maturity to watch how much they charge to the credit card? Robert Glovsky, director of the program for financial planners at Boston University, said students must control themselves.
“Credit card companies absolutely target college students,” he said. “There’s lots of competition and companies want to get [students] early. But the companies are not putting them in debt. Students must exercise responsibility.”
One such student has done just that. School of Management junior Nao Valentino owns eight credit cards. Yet she pays her balance on time, and doing so prevents her from going into debt.
“I refuse to go into debt because interest payments are huge,” said Valentino. “Who wants to graduate with thousands of dollars in debt?”
Valentino also said when she applied to college, she wasn’t sure how easy it would be to get a credit card. She wound up applying for several and said acquiring them was easier than she thought.
Despite having so many, Valentino thinks it’s beneficial to own them, as it helps build good credit.
“[Making] big purchases helps you build credit,” she said. “I spent $500 on books. Students will get low credit limits. I want to keep my cards and use them to get a higher limit.”
Yet not all students share Valentino’s discipline. With the allure of stores, the numerous places Boston has to shop, eat and spend money along with the ability to purchase online with a few clicks of the mouse, one can easily rack up a hefty bill.
BU graduate Ben Gonzalez (SMG ’02) spent a semester in London and ran up a debt of “several thousand dollars.” Gonzalez said he traveled to a new country every weekend.
“It’s the only time I could do it, so I wasn’t going to hold back,” he said. “I was fully aware of what I was doing.”
Gonzalez, who currently lives in Brookline and is an account manager, owns four credit cards and feels companies do target students.
“We are a prime market,” Gonzalez said. “We want to live outside our means, and that way, we both benefit.”
Students especially receive significantly higher interest rates and lower credit limits, though they receive offers in the mail pre-approving them for the plastic. With so many companies and banks to choose from, finding the right credit card can be challenging.
“Switch to a lower interest rate card and try to pay it off aggressively,” Glovsky advised.
He also suggests avoiding them completely if you cannot pay off the balance each month.
“Get ones with no annual fee,” Valentino said. “If you call the company and tell them you are going to cancel, they will usually reduce your interest rate. They will also waive your other fees.”