Friday, November 21, 1997
House of cards
CONSUMER: Those little pieces of plastic continue to lure
students to ‘swipe’ themselves into debt
By Michelle Navarro
Daily Bruin Contributor
Scarlett O’Hara’s words, "After all, tomorrow is another day,"
could possibly be the best motto for students using credit cards.
It assures them their debt will be paid off once that much-needed
check comes in next week. The magic of credit. It’s so easy. Just
one swipe of the plastic and the purchase is made. What’s difficult
about owing $25, or even $100?
Actually, try $12,000. That’s exactly how much Eugene Acosta
owes on credit.
"It’s all from stupid spending," said Acosta, a fourth-year
student and University Credit Union employee. "I think everyone’s
in debt, especially in college."
Credit-card debt is a common problem – as well illustrated by
the Consumer Credit Counseling Service. The organization offers
free budget counseling and other financial assistance, online, by
phone and in person. According to its 1995 annual report, 39
percent of the callers contacted the service because of "excessive
use of credit."
Since most credit cards aren’t issued until the holder is 18
years old, the problem won’t start until the college years. And
boy, does it hit hard.
From books to study munchies to computer supplies and other
student essentials, nothing comes cheap. Add insanely high student
credit interest rates, which companies ruthlessly apply, and
together they make student debt.
Like one fourth-year sociology student, Audrey Osollo, who found
herself in debt worth $9,000.
"That’s not even considering my loans," she said.
Because whipping out that pint-sized bearer of evil is so
simple, purchases can stack up quickly and create a mountain of
debt.
"It accumulates easy," said Yvonne Yen, a fourth-year psychology
student who owes $6,000. "Like at Christmas, you don’t think about
it, you think ‘oh this is easy — $25 a month.’"
"Mentally you think you can handle it, or you think that when
you graduate you’ll have the capacity to pay it back, but that’s
not true," Yen said.
That idea – that upon graduation loads of bucks will magically
manifest themselves – appears to be a popular delusion, according
to Susan Quick, director of operation centers for Money Management
International, which offers free counseling on financial
problems.
"It seems like most of (the college students) who call, mostly
contact us after they get out of school," Quick said.
Besides generally increasing from frivolous spending over the
years in college, the ever-compounding credit-card bill also
worsens by the incredibly high student interest rate.
Banks commonly offer low introductory rates for student credit
cards, which easily entice students to immediately apply. However,
after a limited amount of time, the actual annual percentage rate
will set in and it is usually a lot higher than the rate they
hooked their prey with.
Discover Card’s standard APR is 19.8 percent, Wells Fargo offers
a student VISA card with a 20.05 percent variable rate and the
University Credit Union attaches a 15.96 percent fixed rate on the
standard MasterCard.
To illustrate the considerable difference between introductory
and standard rates, take Bank of America for example. The corporate
giant advertises their student credit card rate at 9.9 percent.
Unfortunately, after six months, it will switch to the standard at
17.99.
In order to be granted lower rates, students have to prove their
financial savvy.
"(College students) are such a high-risk group," said Quick,
"mainly because of things like low income and because they aren’t
used to paying bills regularly."
Although giving credit to students is risky business, companies
still go the extra mile to lure the young, academic clientele with
special Web sites, cards and attention.
"It’s a good market niche for creditors," Quick said. "They tend
to target college students because they want to start a
relationship with students that will last until they become
high-paid professionals."
Until then, however, students will continue to use the plastic.
But what are students using it for?
"The mall," said Osollo, shaking her head. "I’m a
shop-a-holic."
Yen agreed, almost with a hint of shame, as if the two were at a
Shoppers Anonymous meeting.
"All the department stores are bad," Yen said. "It’s so easy.
They’re all evil."
Sometimes students need to spend money, for example, to fix a
car like Acosta. However, he admitted that other "stupid things"
like going out to dinner a lot added to his debt.
In order to stop it from increasing, something must be done.
Both Acosta and Osollo looked to their mothers for help.
"My mom promised to pay half of it if I closed my accounts," she
said, slightly lowering her head.
If mom or dad can’t help out, Quick said the smart thing to do
is make a budget.
"Have a budget particular to what your abilities are," Quick
said, "You have to do this for at least a year in advance. You have
to make good decisions."
Acosta offered his own advice as well: "Just don’t spend what
you don’t have. All I use now is the VISA check card."