10 -The Michigan Daily - Friday, January 31, 1997
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Lured by the promise of buying everything from
birthday gifts to psychology books on credit, students
are trading in their coins and check-
books for plastic - and debt.
By David Rossman
Daily Staff Reporter
For many adults, and an increasing number Terbush said
of college students, the only reminder of holi- "The credit-ca
day fun by the end of January is a credit card company is going to make quite
bill. bit off of your interest - they're safe."
"I've spent money that I know I shouldn't be What most people do not know, said Terbus
spending - because I don't have it," said LSA is how easily their credit rating may be affected
first-year student Ernesto Garza. "I keep thinking I'll establish a good credit ra
In 1996, consumer debt in the United States rose ing," Garza said.
above the $1 trillion level, and many Americans His Visa card, which is currently restricted frc
are now facing large debts from overzealous cred- use due to unpaid bills, carries a 19.8-perce
it card spending. annual interest rate.
This means headaches Other students, lik
for college students jug- Garza, who hope to pa
gling academics and bud- You' off their overdue bills an
gets - or what's left of re-establish a better cre
them. borrowing fm a rating, may be working f
A recent study conduct- a lost cause. Terbush sa
ed by Roper Starch loan shark who their credit history
Worldwide Inc., a New already blemished.
York-based consulting may not break your "Once you get a cred
firm, found that 64 percent card, that company electro
of college students have a leg, but will ruin ically sends the informati
K credit card. (to a credit bureau) instan
Yet, no available public your c(ac - they now know ever
studies have looked in- thing about you.
depth at payment trends of istory. "It's slick, easy and ha
student accounts. - Sonja Terbush pens automatically
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Many students obtain
their first credit card when Michigan Cred
they arrive on campus,
after facing unrelenting credit card company rep-
resentatives lurking in high traffic areas like the
Michigan Union.
Industry insiders take varied views on the stu-
dent market.
"Research shows 'establishing credit' and
'emergency use' as top reasons for students hav-
ing a credit card," said Visa U.S.A. spokesperson
Carolyn Bretschneider.
"And students, as adult members of society,
basically have
many needs.
ment Record Common trans-
actions today
olders c an obtain copies of require payment
n1a flies through one of the over the phone
ajor credit bureaus, such as with a credit
id TRW. c a r d , "
hase a Bretschneider
ur credit said.
n Equifax She also said
1 1-800- that credit lines
extended to stu-
xtend dents tend to be
Iers one about one-third
mpimnenta-the amount
their credit profile. To extended to
contact TRW in writing- other adult cus-
letter containing the follow~ tomers.
ation: complete name, While many
ame, current address, other students make
s within the past five years, the
unity number, year of birth, th same argu-
ture. In addition, enclose a ments about the
of verification of name and need for a credit
dress. card, the risk of
e request to TRW, P.O. Box "overspending"
ton, UT, 84041-8030. can harm almost
fies will be mailed within anyone.
>ur weeks of the request. Those who are
ers may dispute items sympathetic to
on their credit profiles. students' money
matters said get-
ting into debt
around age 20 is something that should be pre-
vented.
"When I was in school I'd pay the minimum on
my credit card bill, and say 'I'm fine,"' said Sonja
Terbush, Michigan Credit Union League
spokesperson.
"But that doesn't work. If you keep paying the
minimum, it will take four to 17 years to pay off a
credit card," she said.
With the frequently high interest rates that
credit cards carry, students could get into deep-
er trouble than they may originally realize,
it Union League
T erbush said.
Once something appears
on a credit report, the infor-
mation is nearly undisputable.
"You're borrowing from a loan shark who
may not break your leg, but will ruin your
credit history," she said. "You won't get that
new car after college, or that dream apart-
ment."
Every transaction with a credit card company is
reported instantly to credit agencies. Anyone with
a credit card has a file - and it could contain a
few surprises.
"Even inquiries for new credit cards stay on
a credit report for 30 months," said Barry Ross,
a credit card marketing representative working
in the Michigan Union earlier this week.
"I'm not going to take an application from a stu-
dent if they've got bad credit," said Ross, who was
marketing AT&T Mastercards.
Terbush noted there are alternatives to gen-
eral credit cards like Visa or American Express,
including bank debit cards or credit union
cards. Both cards often carry no interest or
extra fees.
Many banks now offer a debit card carrying the
Visa symbol, which can be used as payment wher-
ever Visa is accepted. The funds come directly
from the cardholder's bank account.
"When I use my debit card, I feel it right away,"
Terbush said.
One LSA junior, who preferred to remain
unnamed, said she got her first card during her first
year at the University. Now, she said, she's in over
her head.
"I can definitely feel it," she said. "I owe over
$3,500 on two credit cards, and I don't have a
job."
Back tocampus
As some student customers continue to feel
the burden of overdue and unmanageable bills,
credit card companies return to college campus-
es to recruit new customers. Student customers
are attractive because they tend to remain loyal
to their original credit card companies, credi-
tors say.
"Research shows that students hold on to their
first card long after graduation," said Cathy
Cummings, director of American Express public
affairs.
"Some problems do occur, but a vast majority
of our student customers handle their credit
responsibly."
This attitude is a general consensus among
two of the nation's leading credit card compa-
nies.
"Students tend to be loyal to the first bank
LSA junior Leslie Wexler signs her credit card receipt for her sndtreet ster
day. Many college students have found themselves i debt ater oicars.
they do business with. That's why banks are
very keen to solicit to college campuses,"
Bretschneider said.
Financal aid myths
An additional concern when evaluating money-
management habits is how it will affect students'
eligibility for financial aid.
Lynn Borset, assistant director of the University
Office of Financial Aid, said that in most finan-
cial aid cases, students' credit history is not some-
thing to worry about.
"We don't look at students' credit rating,"
Borset said. "However, there is one federal loan
that checks the parents' credit rating."
But many private or alternative loans look at
students' credit ratings.
A student's credit history may give clues to aid-
lenders as to the probability of payback because
private education loans are not guaranteed by the
federal government.
In this respect, students may want to evaluate
their money-management situation before
applying for continuing education loans, Borset
said.
A host of credit card companies hungry for
the student market doesn't make that task any
easier.
"I'm disturbed by the fact that a lot of credit
card companies try to get students to sign up right
away," Borset said. "They sort of barrage stu-
dents."
One way companies seek to appeal to students
is through incentives attached to using the card,
like frequent-flyer miles, free phone calls and dis-
counts on clothing.
Other marketing tactics, like a recent Visa print
advertisement campaign, try to
hook students with a casual,
friendly nature.
In one advertisement, a
Visa card sits on a white
background, and text above it
says, "Just in case you decide
to buy the books this semes-
ter."
People attempting to help
students organize their debt
and future spending habits
said this type of credit card
solicitation works against
their goals.
"This (soliciting) puts our
students more at risk - they're
pretty new at managing
money," Borset said.
Bretschneider, however,
said Visa does not mandate
Curbing ing Ha itst Cut Debt
The Michigan Cei U League offers advice on how to live
w ithout debt . S ver a of t ier tips nc lude:
U Understand that credit is not m'ore money. If your credit card
has a $5,000 mit you don t have $5,000. You have the right to
rent $5,000 - and you pay a very high price for that right.
SFind a card with a low interest rate. Some people are still car-
rying cads with nt ret raes of 19 percent or higher.
SStop ising cr d .i f y ou can't control your credit card spend-
ing, cut the c ards up and throw them away.
* Sit down and mak a ast of your debts. Knock them off by pay-
ing the one w S the highest intere t rat st - not necessarily
the largest amount ow d
* Based on svings goa s and
spending patters a ablsh a
spen ing plan. It dosn t have to b
brimnt -just foowit
campuses have been i tors
like him from u sse o
the sup posd rscedtoesotu
dents.
"C told my w1 n" if ive years we're
going to both be lokng fr work," Ross
saide
Meanwhile, credit card compames wil
return to campuses to temt st zudents wtith
easy credit.
"I worked all last summer and made a
lot of money," GJarza said. "But it's still
just been a struggle"
Resources for help
Students in cedi cr peri have sevral
avenues for astneis~goe on cam-
pus.
Counselors in the Offi of F inancial Aid,
located in the Student Aciviie lBuilding, can
provide advice about rmone:y nmaagement.
"Our office does not jusitkdal with the realm
of financial aid eligibilty - we can also help
students mnanage theii mone y," B~orset said.
In addition, Brehneider si Visa has created
national educational programs to assist students
with money managcmmn.
"We do put programs together which help stu-
dents make banking dcisions,"'she said. "And so
far, they have been fabudously popuiair."
Terbush said one plan for cleaning Up debt thai
has already been incur red is simp ly sitting down
and getting organ ized.
pp ...