THE COLOR OF MONEY
In college, credit card is a hazard

By Michelle Singletary

Just before I left for college, my grandmother laid down the law on a lot of things.

Big Mama's first rule: No boys in my dorm room. She threatened to show up on campus at any time to make sure I didn't disobey her.

Rule 2: Spend what little money I had wisely. Big Mama explicitly warned me about getting a credit card.

"At your age, a credit card ain't nothing but trouble," she said. "All you're doing is promising to pay later what you don't have today. And what makes you think if you don't have it today, you'll have it tomorrow?"

I listened to my grandmother. I didn't get my first "plastic" until I was just about to graduate and had accepted my first full-time job. Even then, I chose an American Express card because you had to pay it off every month.

The reality is that many undergraduates are ill-equipped to handle the responsibility of managing debt. It's crazy to give college students with limited income access to so much easy credit. They are under a lot of pressure to please their peers. Much of what they charge is for clothes and entertainment.

In fact, seven out of 10 Americans believe it is a bad idea for college students to have a credit card, according to a recent survey by the Orlando-based InCharge Institute of America, a nonprofit personal finance education and credit counseling organization.

Nellie Mae, which provides federal and private education loans for undergraduate and graduate students and families, has conducted three credit card studies since 1998. Quite frankly, the results are troubling.

The average credit card balance among undergraduates was $2,327 in the latest survey. The survey, based on 2001 credit card use, also found that 21 percent of undergraduates had credit cards with balances between $3,000 and $7,000, a 61 percent increase over the 2000 data.

Overall, students double their average credit card debt from the time they arrive on campus until graduation, according to Nellie Mae. And they collect credit cards like wall posters.

The number of cards held by students continues to increase, from three cards in 2000 to 4.25 in 2001. Also in 2001, 83 percent of college students had at least one credit card, up from 67 percent in 1998, according to Nellie Mae.

This year, I met a college student who had landed a wonderful job with a $10,000 signing bonus. This student wanted to know if she should save the money or pay off her credit card debt. When I asked the amount of the debt, she said she owed $10,000.

"What in the world did you buy for $10,000?" I asked.

"Honestly, I can't remember most of what I bought on the cards," she admitted.

Now you know, that is a shame.

But at least she had a windfall to pay off the cards. Many students aren't so fortunate. They instead count on getting a well-paying job upon graduation to pay off those debts, but there's no guarantee that will happen.

Given students' rising credit card debt, seems to me Big Mama was right.

So, if you're about to send your child off to college, insist that he or she leave credit cards alone. As with sex, credit card abstinence is their best protection.