- The Washington Times - Monday, August 30, 2004

As college campuses across the nation roar back to life this week after the summer break, the talk is turning to credit — and not necessarily the academic kind.

Marketing representatives from the major credit card companies typically spend a few weeks each semester trying to lure new and returning students as customers.

Students make good prospects because they need money and haven’t developed loyalty to any particular card, whether it’s Visa, MasterCard or another creditor.

The card issuers make themselves hard to avoid, popping up at student unions and sporting events with free T-shirts, sunglasses and music CDs for anyone willing to fill out an application for a new card.

Financial planners have advice for young people facing this onslaught: Be careful.

Be very careful.

“By the time you get to college, you are just beginning to establish your credit. You can’t be too vigilant, because the missteps in the early years can last for years to come,” said Greg McBride, senior analyst for Bankrate.com, a personal-finance Web site.

A young person who gets off on the wrong foot when establishing his credit history may be forced to pay higher insurance premiums and can damage future homeownership and job prospects, Mr. McBride said.

The average undergraduate student in the United States finished school with more than $3,000 in credit card debt in 2001, according to the most recent data from Nellie Mae Corp., a Braintree, Mass., company and a leading provider of student loans.

This debt is in addition to student loans, which now average $20,000 for a four-year graduate, according to Nellie Mae.

Financial planners differ on whether college students should even have credit cards. Some say they are good for emergencies, but others say the temptation to splurge on booze and spring break trips to maybe Cancun, Mexico, are too hard to resist.

Tony Budny, a sophomore at George Mason University in Fairfax, said he has avoided getting a credit card because he is already taking on debt to pay for his education.

Mr. Budny said he will get a card eventually to help establish his credit, and when he does, he’ll seek something with a low interest rate, a low credit line and perhaps a cash-back bonus program.

“I’ll start slow,” he said.

In most cases, once a child turns 18, they can get a card without their parents’ permission.

But that shouldn’t stop parents from trying to advise their college-age children on how to use plastic wisely, financial planners say.

Eighty-seven percent of college students rely on their parents for financial guidance, but only 26 percent of people between 13 and 21 have actually talked to their parents about managing money, according to a study by the Jumpstart Coalition for Personal Financial Literacy, a consumer education group.

“The message here is to start having the conversation early,” said Daniel F. Drummond, spokesman for Your Credit Card Cos., a group of major card issuers that have joined forces to educate the public about financial matters.

There are dozens of credit card choices for college students, with some cards that have credit limits as low as $500, according to Robert McKinley, president and chief executive of CardWeb.com Inc., a Frederick, Md., company that tracks cards and their rates.

Mr. McKinley’s advice: Try to get a deal at a bank where a student’s parents have accounts or consider a debit card, which withdraws money from a savings or checking account.

Another option: Visa Buxx, a prepaid, “reloadable” card geared toward teenagers and younger college students.

The Visa Buxx can be used anyplace that accepts Visa, but it will only allow its user to access the prepaid amount that’s on the card.

But college students don’t necessarily go wild when they get their hands on plastic. Some are more responsible than other adults.

The average balance of a college student credit card account is $552, roughly one-third the size of the average balance of a young adult ($1,465) and one-fourth the size of the average balance for an older adult ($2,342), according to a 2002 study.

Your Credit Card Cos. recommends college students follow these tips when using plastic:

Make payments on time. Establishing and maintaining a history of making regular payments help to improve consumer-credit scores and can lower credit card interest rates.

Evaluate credit offers. Credit card companies regularly solicit prospective and existing customers with better terms and interest rates to ensure that responsible users of credit have access to the best financing opportunities.

Track monthly spending. Design a reasonable monthly budget and do your best to stick to it. Track actual expenses as they are incurred. Notice whether you are spending more than you budgeted, and reduce your spending where you can.

Check credit and bank statements. Ensure there are no unauthorized purchases or changes in your personal information.

Review credit reports regularly. Credit reports usually cost about $9 each, and in a variety of circumstances, such as suspicion of fraud or denial of credit, consumers are entitled to free reports. As part of the Fair and Accurate Credit Transactions Act of 2003, free credit reports will be available once a year from each of the three major credit bureaus.

Use caution with telephone or Internet purchases. Don’t give out your credit information over the phone or online unless you initiate the transaction and you’re comfortable that the company you are dealing with is reputable.

Record credit card information. Record account numbers, expiration dates and customer service department telephone numbers in a safe location. Call the issuer if your card has been lost or stolen.

Save, then shred receipts. Compare receipts with billing statements to evaluate whether the purchases listed are yours. Shred receipts and statements before throwing them away.

Keep cards secure. Don’t lend credit cards to anyone or leave cards or receipts lying around and never write account numbers on the outside of an envelope.

Source: Your Credit Card Cos.

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