People in their early twenties, many of them college students, are among the fastest growing group of Americans filing bankruptcy.
The trend toward younger people filing bankruptcy should perhaps come as no surprise. Recent surveys show that 10% of all teenagers between the ages of 12 and 19 have at least one credit card of their own.
Two thirds of undergraduate students report at least one open credit card account, and the average student graduates with between $3,000 and $4,000 in credit card debt, and many owe much more, in addition to student loan debt. Many of these students have never held full-time jobs, or work only during the summer.
The trend toward marketing credit cards to college students has increased in recent years to the point that some campuses allow credit card companies to market on campus and there are even student fundraisers tied to signing other students up for credit card accounts.
This trend, and the financial management problems it appears to breed, has raised enough concern that some states have enacted legislation limiting solicitations to college students and many experts have called for committees to study the problem.
The issue was even raised in the recent bankruptcy reform procedure, and the new law directs the Board of Governors of the Federal Reserve to review the issues.
Many college students are living alone and managing their own money for the first time, and even those experienced in handling money find it more difficult to keep track of credit card purchases than those made with cash, checks or debit cards and deducted immediately.
Experts agree that people tend to spend more money when using credit cards than when relying on cash in hand, for a variety of reasons: the inability to spend what they don't have when using cash, the visibility of the declining balance as payments are made from a checking account or cash reserve, and even a mentality that tells some shoppers they don't have to worry about cost right now if they have the option of paying later.
Of course, interest, late charges, recently increased minimum payments, and other factors often make those credit card bills less manageable than the user expected. Credit card debt can also make it more difficult to obtain some graduate school loans.
James Roberts, a marketing professor at Baylor University, has studied the use of credit by teenagers. Roberts says that students who have high credit card debt are more likely to work longer hours and have lower grades.
Nearly all experts agree on the bottom line solutions: don't use credit cards to make purchases you couldn't otherwise afford, pay off balances regularly, and avoid using credit cards for small purchases like coffee, which often add up to surprise credit card users when the monthly statement arrives.
Those tips are important for everyone, but especially for college students who may otherwise find themselves starting out behind the game, with debt and credit problems affecting employment options, the ability to rent an apartment or buy a house and much more.
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