Credit cards a no-no for college students

WASHINGTON — I've said it before, and I'm going to say it again and again. College students should not get credit cards until they are at least about to graduate and have lined up a full-time job.

Alas, I know I've largely lost this battle. There are parents, college students and credit card executives reading this who can't wait to argue the opposite.

In fact, researchers at Georgetown University's Credit Research Center conclude in a study that students can learn to manage a credit card.

Most young adults who qualify for a credit card while attending college have smaller balances, lower credit limits and use their credit cards less frequently than others in the same age range, concludes the research paper, which is being published in the November 2004 issue of the Journal of Student Financial Aid.

Credit card companies couldn't wait to trumpet this news.

"I think this is a good indication that students are becoming wiser about the use of credit," said Dan Drummond, a spokesman for Your Credit Card Companies, an ad hoc group of six financial service companies that have banded together to provide credit education to the public.

Drummond was eager to highlight some key facts from the Georgetown study:



87.9 percent of student accounts are current.

The average balance of $552 for a student account is approximately one-third the size of the average balance of a non-student young adult's account ($1,465) and one-fourth that of an average older adult's account balance ($2,342).


College students are more likely to pay off their credit card balances in full each month than older adult account holders.
Ah, but the credit card companies conveniently left out in their news release these findings also from the Georgetown research paper:



Student credit accounts are more likely to be delinquent.


Student accounts have a higher rate of charge-offs than those being used by older adults.

Students with credit cards are more likely than older account holders to exceed their credit limits.


In a given month, 18.4 percent of student credit users were assessed fees for either being late or over their credit limits, much higher than the 12.5 percent of older adult accounts.
Despite those negatives figures, college students should have access to credit, said Professor Michael Staten, director of the Credit Research Center and co-author of the student credit usage paper.

"I think of a credit card as a power tool," Staten said. "It is powerful and it needs to be treated with respect because you can get into trouble if you don't pay attention to how it is used."

Can college students use credit wisely? Sure, many can.

However, there is no need for college students to rush into using credit. They've got plenty of time to be debtors. In their formative financial years, they need to learn to get by on cash before mastering the art of using a credit card.

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