Caught in the Red

Credit cards mean financial freedom for some students, massive debt for others Sound like a Faustian bargain? It's simply a typical offer from a credit card company trying to attract student business. "It's great and a convenience that these companies come to campus to offer credit to students," said first-year Law student Todd Rosen. "But students have to be educated of potential dangers and realize that they have to pay back what they charge." Citibank Visa and American Express Optima are two cards geared specifically toward students. In order to help students take their first steps toward financial independence, both offer no annual fees and low introductory annual percentage rates. But are these comfortable packages too good to be true? Citibank spokesperson Maria Mendler said credit companies provide students a great service by actively working to sign up prospective spenders. "Student credit cards allow students to spend when they need to," Mendler explained. "For the most part, they're a convenience for students. And Citibank sees it as the chance to start a long-term relationship with new consumers." Credit cards are attractive to students as well, giving them the chance to buy items when they desire and pay later. Cards can be especially helpful at the beginning of a semester, when students need to buy everything from required course texts to posters for dorm room walls. But as many students have learned, credit cards can have drawbacks too. The consequences of credit card abuse, including the inability to repay credit on time, has in the past forced students to quit school so they can work full time to pay off the backlog of bills. And interest rates can make a bill total increase exponentially -- sometimes by as much as 20 percent per month. College sophomore Liz Schuster said she has a friend at Hanover College who hit the credit limits on three cards in her first year at school, ending up about $2,000 in debt. She threw all the cards away to prevent more spending, but she still had to work three jobs over the past summer -- including an 11 p.m. to 7 a.m. shift at a local factory -- to pay off the charges, Schuster said. "The worst of it is that she still had to borrow money from her parents to pay off her debt," she added. "At least they're not charging her interest." With 59 percent of college students holding cards, according to research conducted for National Credit Counseling Services, education on responsible credit card use is more necessary than ever. NCCS representatives say the group is leading the move to give students the tools they need to avoid credit card trouble. Operating out of Columbia, Md., NCCS is a non-profit, community service organization that provides a wide range of financial counseling services and educational programs for students and consumers nationwide. Founded in 1992 by Bernaldo Dancel, the organization has grown from a staff of one to more than 125, assisting over 20,000 consumers across the country. "Our goal is two-fold," NCCS spokesperson Laura Mitroff said. "First, we want to help consumers who have overextended themselves by running a debt management program. Second, we want to heighten consumer education." Mitroff said she believes college students need credit education just as much as people who have owned credit cards for years. "Credit cards give students their first experience with managing their money," Mitroff said. "They get to be on an even keel with everyone else out there, and they need to know how to deal with that increased responsibility." NCCS receives more than 4,000 calls per week and Mitroff said she has observed a steadily increasing percentage of young people calling in with questions and problems. "Credit card companies do target students, offering incentives and free stuff," Mitroff added. "And NCCS is here to give them the education they need." Even credit card companies are starting programs to educate students. Citibank, for example, has had a consumer education program in place since 1990. For companies, credit management education programs can help reduce the risk that customers will incur massive debts on their cards -- debts that can be difficult for the companies to recover quickly. Most students said they like the trend toward increased education. But some recommend even stronger measures to prevent students from overextending themselves. "Credit card companies should keep the limit at reasonable rates to discourage students from overspending," said Wharton senior Robert Vanderhyde. Lindsay Ackerman, a College sophomore, said she believes credit card companies should "send speakers to campuses to make students aware of the dangers of credit cards." Amanda Poore, a debt management counselor at NCCS, has experienced heavy credit problems herself. She said students should not use cards unless absolutely necessary. "If you don't have the cash, you don't need the item," Poore offered as a rule of thumb.