As recently as the 1990's less than 10 percent of college kids had credit cards. Today, approximately 70 percent carry these little gems. And among college kids with credit cards, the average has up to 5. And the most striking part of this decline into indebtedness is that many of these young people are using their long-term college loan money to pay off short-term plastic debt. Many of these young people are coming out of college with so much debt-they will likely be in debt for the rest of their lives! Unless they make a u-turn in a New York minute, many will never be able to save for their own kids' college educations, give to others, or prepare properly for their own retirements.
Frankly, I get angry at colleges that let the credit card companies come on campus and set up their little card tables loaded with $3 gifts: tee-shirts, Frisbees, and coffee mugs. And all a kid has to do to get one of these fabulous gifts is to sell their soul and accept a credit card. In many cases, under present law, they don't even have to show a source of income.
But, with all that said, I am not suggesting that it's always a mistake for a college student to carry a credit card. What I am saying is that it's time for parents to get involved-and stop letting the inmates run the asylum! If you want to let your Joe Cool go to college with a credit card, fine. But, consider doing five things first:
Set a low spending limit. In many situations a card with a $500 or $1000 limit is more than adequate.
Decide what the card can (and, cannot) be used to purchase. For instance, is it just for emergencies? Can she buy gas with the card? What about cloths, or books? Make a list (hopefully a short one) and have both parties sign off on it.
Determine to pay every penny every month-no exceptions. This is the time when life-long habits are being formed. A "zero tolerance" plan makes great sense here. This card is not a magic carpet ride. It is simply an instrument for paying bills and keeping records. Using a credit card to buy stuff we don't have the cash to pay for is the beginning of a train wreck. A little further education here: It would be wise to help your son or daughter understand that one of the reasons merchants like credit cards is because they know that plastic spending is less painful than using real money. People using credit cards, on average, will spend 12 to 18 percent more than they would if they were using cash. The goal is to avoid the urge to splurge.
Every month, within 24 hours of the time the student receives his credit card bill, he promises to fax you a copy to review.
If any of the provisions in 2, 3, or 4 above is broken-the card is closed and canceled. No exceptions.
Tough love? Maybe. But there are millions of young American adults today who would
give anything to have had someone love them enough to apply these five simple rules a few short years ago.
Steve Diggs is an international speaker, broadcaster, and a writer who can be reached at www.SteveDiggs.com