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College student credit card debtCredit cards have become a fact of life in college campuses. Given the ease and flexibility of use its popularity among students is irrefutable. However records stand to evidence that overuse of this plastic is the first cause for many students to enter debt situations, one that has a long and lasting consequence in conjunction with student loans.
While inexperience about finances plays its own part, expectation of a high-yielding occupation post-college to deliver them from current debts conspire to instigate inappropriate spending habits, until it goes well beyond a students capacity to afford them. In addition, credit card companies bewitch students by opening their makeshift booths in college campuses to entice students with low introductory rates that inflate soon after the teaser rates expire.
Practices aggravating credit card debt among students:
As the gap between salaries, job opportunities and cost of living rises students are becoming more and more susceptible towards debt. To make matters worse, rising tuition costs and inadequate measures taken by the Federal aid for Student Debt to resolve debt issues have left college goers in a lurch. This has grievously resulted in students picking debts from outside to continue their education and thus sinking their finances.
Financial Institutions and credit card companies target youngsters to market their financial products through aggressive marketing strategies. Tempting offers gather thick and fast on the first year of college itself. A recent research exposed that on an average a new student received solicitations for eight credit cards and eighty percent of undergraduate students have credit card related debt.
Credit cards by themselves are tempting enough and to make it even more enticing the credit card companies dangle the lure of reward points that can be earned upon credit use and redeemed for exciting free shopping sprees. In conjunction students are offered discount coupons with credit cards. Sadly the colleges themselves contribute to the debt issues by encouraging credit companies to promote their products from within the college premises.
As of today nearly 45 percent of the college students are reportedly writhing under the burden of credit card debt. For those who receive no financial aid from parents or government the circumstances for continuing education are grimmer. In the absence of a job to succor them through the rising costs of education the only resort to pay for tuition fees are credit cards. Most students charge their credit cards without realizing the mounting expenses that is all geared to haunt their future lives.
UNDERGRADUATE STUDENTS AND CREDIT CARDS: AN ANALYSIS OF USAGE RATES AND TRENDS BASED ON NELLIE MAES REPORT PUBLISHED IN 2005:
Nellie Mae, the nation's leading provider of higher education loans came up with its latest findings on student loan applicants. The figures reflect the susceptibility of young college-goers getting ensnared by the allure, called credit cards; the profusion of credit cards among youngsters; and their eventual failure at meeting credit card dues which accumulate into high interest debts in future. Here is a glimpse of the facts as revealed by the company:
• Seventy-six percent undergraduates begin college with credit cards.
• The average outstanding balance on undergraduate credit cards amounts to $2169.
• Undergraduates reported freshman year as the most prevalent time for obtaining credit cards, with 56% reporting as having obtained their first card at the age of 18.
• As the students progress through college credit card usage swells. Ninety-one percent of final year students own a credit card as compared to 42% of freshmen. Fifty-six percent of final year students carried an average of four or more cards while only 15% of freshmen hovered around the same number. Final year students carried an average balance of $2,864; freshmen carried an average balance of $1,585.
• Undergraduates reported direct mail solicitation from credit card companies as the primary cause for selecting a credit card vendor
• 44% of the undergraduate credit card users manage to tend just the minimum monthly payments while 11% make less than the minimum required payment.
• Undergraduates carry an average of 4 credit cards
• 43% of the undergraduates carry four or more cards.
• 56% below the age of 18 are credit card users.
Tips that can keep credit card debts at bay:
Nellie Maes crunching of numbers reveal how fully the credit card industry has penetrated the strata of college goers. The young generation on the other hand has lapped it up gluttonously only to find that an errant credit card bill accrued from a binge at a favorite pizza joint while in college is haunting them long after those times have become a memory. In order to avoid such unwelcome situation here are some simple steps to follow:
1.Resist the allure of applying for credit at random in college premises. Those who commit this folly are statistically more prone to get into debt holes. The trivial gifts promised by credit card issuing companies in exchange for accepting their cards can finally prove to be costly mistakes. Their offers of free gifts and low interest rates are nothing but fleeting.
2.Carrying a balance can be financially incriminating. Spend only as much as you can afford to pay off each month. Unpaid balances accrue high interest charges and sometimes late payment fees which can snowball into bigger debts over the months.
3.Credit cards ought to be used for emergency expenses only. One must abstain using it for purchasing consumables as food, entertainment or even worse, tuition. It could be very tempting to employ the plastic for trivial purposes but they can add up to a huge balance unnoticeably and amazingly fast.
4.Think of other options besides a credit card. A debit card for instance is equally convenient to use except it forces a spending limit on the user. A debit card accesses ones checking account directly and the spending limit is defined by the amount he has in his account.
5.Set up a budget. Take time to establish a monthly budget that includes realistic figures for credit card payments. Trim and adjust monthly bills so that it sits comfortably alongside your credit card obligations.
6.Keep an eye on your credit report. Employ credit cards to ensure enhancement of your report. Abstain charging your card to its maximum limit. Avoid late credit card payments as this can ding your credit scores. Credit companies can raise interest rates on your credit cards without prior notice should they find your credit scores wanting of the right figures.
7.Avoid cash advances from your credit cards. They are expensive cash options. Chase's Student Flexible Rewards Card, for example, carries a 23.99 percent variable interest rate on all cash advances which is far higher than its annual percentage rate of 17.99 percent.
8.Applying for too many credit cards is a common mistake among college goers. One or two cards experts advice, are enough to meet a students needs.
Repercussions of debts upon a students future:
Student credit card debts have damaging repercussions on a students career. According to an advisor at a major university more students drop out of college on account of credit card debts than they do of academic failure. Those that manage to scrape through college in spite of debts are in no better circumstances. Exhilarated at having earned a college-degree, they enter the real world with hope and anticipation of a promising future. A new and well-paying job may even set them on the road of their dreams only to bombard them later with the realization of mountains of student debt.
Student credit card debt is an inclement condition of American society. But a couple of right decisions on the lines as mentioned above can pay-off big in the long run thus securing a student from being part of the dismal picture of college credit crisis.
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