Credit cards can cast a troublesome spell many are overwhelmed by debt

The next time you pull out your credit card to pay for a purchase, think again about the responsibilities you assume under the power of plastic. For many college students, obtaining a credit card is an effective way to build good credit and learn the value of budgeting. However, with credit cards being so easy to acquire and seemingly a cinch to use, many students tend to lose themselves in the conveniences of credit.

Credit-card companies strategically set up tables on college campuses, luring students with free goodies ranging from Frisbees to candy.

Many campus groups sponsor the tables to raise money for their organizations. Students also may find applications stashed in their campus bookstore shopping bags, as well as on the Internet.

Although most students do not have an established credit history, credit-card companies are attracted to the students’ profit potential. According to Mendi Smith, manager of media relations for Associates National Bank, students are likely to be credit-card customers for life. Associates National Bank is a leading issuer of credit cards to students. “We estimate that 60 percent of college students pay off their balances every month,” said Smith.

However, credit overwhelms many students.

Wyshona Lawson, a Virginia Tech graduate student, said all of her troubles began when she filled out a credit-card application on campus, thinking that she would not be approved. Lawson was approved, for five credit cards. “Since three out of my five credit cards are maxed out, I rarely use them anymore,” said Lawson. “When I first got them, I felt like I could rule the world, and then $500 and $1,000 added up real quick and I got smart.”

“I decided to keep my cards on hand for emergencies only,” explained Jonathan Duty, a Virginia Tech senior, “but around Christmas I started spending and it became addictive.” Duty managed to amass $2,000 in credit card debt, and had to result to consumer credit counseling to help him out of trouble.

Credit cards can prove valuable for many students, and most are able to manage their credit spending. Kelly Driscoll, a Virginia Tech senior said that he uses his credit card for convenience. “I use my card at least two or three times a week and I don’t use it to buy things that I can’t afford,” said Driscoll.

Ruth Lytton, associate professor at Virginia Tech, teaches Family Financial Management, a course designed to provide what she calls a “financial survival kit for life.” Students may enroll in this course to learn more about financial planning tools for their future.

According to information on Lytton’s Web site, an estimated 60 percent of the 8 million U.S. college students have credit cards in their own names.

The average undergraduate student carried a credit balance of $2,226 in 1996, while 14 percent reported balances between $3,000 and $7,000.

“One student in my class left Virginia Tech with an excess of $30,000 charged on credit cards. Although this is an extreme case, dependence on credit and the associated interest charges can spell a nightmare for your future and the process of repayment to get completely out of debt,” said Lytton.

“On the positive side, students should establish credit and use it responsibly while in college. A credit card will be easier to get as opposed to waiting until you are employed and out on your own,” commented Lytton. She also said the key to responsibly owning a credit card is devising an effective financial plan “to balance spending with income.”

Lytton emphasized maintaining good credit. “Your credit history follows you … you cannot move away from it, as many students seem to think. Be aware that late payments or failure to pay will become a part of your credit history for seven years,” stressed Lytton.

Many employers check potential employees’ credit histories. Good credit also is necessary when purchasing a home or car.

Lytton notes some important credit card management facts on her Web site.

One tip is to shop around for a credit card that it right for you. Credit card fees and features vary considerably. Never commit more than 15 percent of your take-home pay to credit payments. This is where most students are hurt because many do not even have a job while in school, and still are financially dependent on their parents.

In extreme credit card debt cases, such as Duty’s, consult a consumer credit counseling service to help manage and pay off debts. “My situation got out of hand, but it’s reassuring to know that I can and will get back on track,” he said.