Facts and figures indicate that 33% of high school seniors use credit cards. If a student has not taken a financial literacy class, or a credit counseling class they are most likely not going to restrain themselves when it comes to using their credit card. This increases the likelihood that they will over extend themselves and damage their credit, ultimately creating problems later on in life.
The percentage of college freshman that carry a credit card is in the area of 54%, which is alarming since most students don’t know how to effectively manage their credit. If you survey college sophomores you find that the percentage carrying credit cards increase to 92%. By the time a high school student gets to college he or she is already toting nearly $1,600 in credit card debt, which increases through out their college years as the need arises.
Over 80% of college students have balances on their credit cards which adding up to roughly $1,000. That can prove to be a substantial balance for a college student considering all of the other expenses they will incur such as books, fees, tuition, and miscellaneous items. That explains why only 60% are able to pay their balance in full from month to month and the other portion have balances which are accruing interest, which represents a time bomb if not kept in check. Ten percent of college students have credit card debt in excess of $7,600, while the norm for college students is roughly a little more than $3,100. A study done by the state of Oklahoma during 2002 indicates that 33% of college students have at least four credit cards.
It is really difficult to provide accurate statistics on teenager credit card usage because you can not apply for credit if you are under the age of 18, unless of course that student gets a co-applicant or co-signor such as their parent or guardian. Unfortunately some banks are now waiving this requirement and will extend credit to teenagers, under the age of 18, if they are in college and can provide college identification. Banks rely on the fact that students represent a very profitable market because a number of students cannot pay a balance in full and unpaid balances are represent profit in the form of finance charges.
Approximately 7 to 10 percent of college students give up on pursuing their education because they have incurred an excessive amount of debt. Teenagers that receive credit cards at an early age don’t understand all of the intricate details involved with having a credit card such as the interest rates and all of the different fees they can be subject to.
Credit card companies like to go after students because they know that once a student opens a credit card account they are most likely to remain loyal to that credit card company. This loyalty stems from the fact that 71% have no idea what interest rate they are paying according to a study done in 2000; therefore if they are presented with a credit card offering a low interest rate they don’t really have a basis for comparison.
Jumpstart Coalition for Personal Finance Literacy -According to the Jumpstart Coalition for Personal Finance Literacy one of three high school seniors use credit cards. Half of these students have credit cards in their own names. Teens don’t always realize the reality of excessive interest rates and fees.
Contributing Authors: Susan Sundblad & K Schweitzer – Susan Weber – Tamsen Butler.