The Convenience Of Credit Cards Essay

911 words - 4 pages

Credit cards can be invaluable tools for college students. Using a credit card is more convenient than cash, and may help a young adult build credit that will be useful throughout his adult life. However, before a student applies for a credit card, he needs to know how credit works and the consequences associated with the misuse of a credit card. Credit can be very helpful, but may also be dangerous if one does not use it properly.
Many students apply for a credit card as a way to have extra spending money, without realizing that the money has to be repaid. Students should have an income in order to repay their credit card purchases. Unfortunately, many students do not pay off their cards, and therefore incur large amounts of debt. Student credit cards are more likely to have higher interest rates than others’ cards due to the lower credit scores students usually have. The combination of the initial debt and high interest rates coupled with late fees and the deterioration of one’s credit score can initiate a seemingly perpetual cycle of debt early in a young adult’s life.
Another mistake many students make is to not evaluate their financial options well. In 2008, 30% of students used their credit cards to pay for educational expenses with the average cumulative amount charged for direct educational expenses being $2,200 (SallieMae). Students are choosing to put educational expenses on credit cards with interest rates upwards of 16%, (Silver-Greenberg) instead of taking out a student loan with much lower rates and better payment terms (SallieMae).
Students need to be aware of the financial machine formed by the partnership between colleges and credit card companies. Michigan State University has an $8.4 million contract with Bank of America in which the Bank may use the university’s logo as well as the student’s names and addresses (Glater). The alumni association of the University of Michigan has a similar contract with Bank of America for $25.5 million over 11 years (Glater). Michigan State receives, in addition to their yearly amount, royalties for each student account opened and higher amounts if the student accounts hold a balance (Glater). The financial pressure theoretically kills any incentive the university may have to encourage financial responsibility.
Many credit card companies believe that college students are naïve enough to fall for gimmicks and giveaways, and so far they have been widely successful. Sometimes, all it takes to get a college student to fill out a credit card application is to offer him a free sandwich or a Frisbee. This is a very small price to pay to appeal towards such a large, untapped market. Although young adults are usually perceived as...

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