Teenagers and their Credit Cards
Availability of credit cards have left young people in debt. College-age students and low-income consumers, typically deemed bad risks, are easy targets for credit card companies. Credit card companies should not target college-age students and low-income consumers because of their lack of financial stability. In 1996, twenty-something consumers owed an average of $2,400 on their credit cards, nearly triple what they owed in 1990, according to research by Claritas Inc., a marketing research firm in Virginia. If, payments of $75 were made monthly to pay off a $2,400 debt, it would take 3-1/2 years with a 16 percent-rate card, and you'd pay $ 750 in interest.
"There's no question that young adults are the most heavily burdened by credit card debt," said Stephen Brobeck, executive director of the Consumer Federation of America. Many will plunge into debt. Many teens waste little time taking on debt after leaving home. The number of 18 and 19 year olds with credit cards in their own name is climbing, according to Teenage Research Unlimited. Of American teen between 18 and 20 years old, 41 percent have their own cards, compared with 36 percent last year.
Across all age groups, the statistics don't paint a pretty picture. Bankruptcy fillings in the United States have more than doubled in the last decade, from 530, 436 in 1986 to 1.2 million last years. Americans owe $ 484.6 billion in credit card debit, up from $ 437.9 billion in 1996, according to the Federal Reserve Board. That National Foundation for Consumer credit, with 1, 300 offices nationwide, helped 1.3 million consumers last year pay off debt, a 20 percent increase over 1995.
Most students don't realize the hole they are digging during college but realize it when credit reports are pulled for job applications or when they try to purchase a home or car. The problem starts when a teen gets a credit card with a parent as a co-signer. That allows the teen to build a good credit history, so that by the time he or she graduates and gets a job, credit card approval is no problem. Many teens become overextended and eventually find themselves with poor credit.
More parents than ever are sending their teenagers to shopping malls and movie theaters with a piece of plastic instead of pocket change. "Marketing to students is definitely working, as many of them end up signing for as many as five to six credit cards," say Don Blandin, president of the American Savings Education Counsel (ASEC). A 1999 survey by ASEC found that 55% of all college students and 7% of high school students have a major credit card. And nearly a third do not pay their bills in full...