Confronting credit card debt head on

"But if it were real money, I'd worry, you know?" A student balancing four slices of pizza and an overflowing FroYo used this reasoning to justify his dwindling Dining Bucks as he left McElroy last week.

When it comes to "real money," however, credit cards are often the Eagle-One card of irresponsible spending, treated more like a nebulous source of money than a line to the spender's bank account. A 2004 survey by student loan company Nellie Mae reported that 76 percent of undergraduates have a credit card. At Boston College, a poll of 50 students across all grades and majors revealed that only 38 percent, have a credit card. Still, as a significant percentage of the population, undergraduate credit cardholders are on the forefront of the complicated issue of student debt.

If you've ever made a big purchase seem smaller by putting it on a convenient little plastic card, you're not alone. In fact, credit cards are sometimes the best way to buy (how else are you going to order Season two of Heroes on Amazon?). But with 60 percent of undergraduates nationwide racking up an average $2,000 of credit card debt, student borrowing is becoming a problem.

A typical trend, especially among younger undergraduates, is the "emergency" credit card linked to the parents' bank account. "Mine's for emergencies and basic necessities," says Jessica Seminelli, A&S '12. In a similar situation, Stephen Lovely, A&S '11, said his credit card is used only "if I lose all my money and I have to get home."

Students typically hold their own credit cards for two reasons. "I have mine to build good credit," said Rachel Stephan, CSOM '11, who uses hers mostly for online purchases. A good credit rating is a concern shared by many. Morgan Gottfried, GLSOE '10, got hers as an undergraduate for similar reasons. "You have to establish a good credit history so that you exist in the system," she explained. Otherwise, loans can be difficult to come by later.

The second reason is easy availability and special student offers. James Womboldt, CSOM '11, switched to Bank of America because of its convenient services. "I was offered a credit card along with my student checking account," he recalls. "I don't use it often, usually just online, and I pay it off immediately." Banks and credit card companies attempt to draw in students with favorable deals like these in order to establish them as customers when they graduate.

Students without credit cards point to the duplicate functionality of debit cards. "I'm a little afraid of the interest and debt on credit cards," says Meg Denstedt, A&S '11. "You can't go wrong with debit." Many students with "emergency" cards also hold their own debit card that they use for everyday expenses.

College students are especially susceptible to credit card debt for a few reasons. High tuition bills, low income, and expensive extra necessities like textbooks combine in a demographic that typically has little to no experience with credit. While we all need to gain experience with borrowing and debt sooner or later, it can be dangerous jumping into the deep end to find out if you can swim.

Usually, students find that they can manage their credit with relative ease. Sometimes, however, the allure of charging big purchases can be too much to handle.

"Debt can build up without you realizing," says Alyssa Duquette, LSOE '10. "I only use my credit card for big purchases like books and sometimes gas. I try not to use it when I don't have to." For students with less self discipline, however, the slide into debt can be unnoticed or ignored until it is too late to fix.

The real problem, says finance professor Elliott Smith, is a lack of education regarding the use and misuse of credit cards. "Too many kids are graduating with too much debt on their shoulders," says Smith. "Credit cards are just too proliferated among kids who are inexperienced in significant credit."

Smith's efforts to promote credit card education have taken him from the Massachusetts Department of Consumer Protection, where he sought to remedy "the exploitation of inexperienced undergraduates" by credit card companies, to the director of First Year Experience, Rev. Joe Marchese. The skit on credit card debt at orientation is the product of one of their conversations. "If I had to sum it all up," Smith concludes, "I think that there should be effort by the administration on a formalized credit card orientation program. We should and need to go further."

Help is on the way, however, in the form of the financial literacy program Successful Start. Organized by Marsia Hill-Kreaime, senior financial aid associate, the 3-year-old seminar series brings in experts on financial planning to fill what many see as a gap in the average undergraduate's education. "It's been a concern of many around campus. You don't receive it in class; you didn't learn about it in high school." She is skeptical of banks' student credit initiatives. "Banks are out to make money," she says. "It can be good for students if they want to build credit, but they have to be disciplined."

Bank of America, for its part, has played the role of good corporate citizen. It has offered its "Ultimate Money Skills" program, a joint effort with Monster Worldwide, on campuses across the country for five years. In 2008 the seminar traveled to 275 schools. "Bank of America is committed to students and their long-term financial success. We want to give them the opportunity to reach their life goals, and we're excited about how this program distinguishes Bank of America as a leader in providing college students the tools they need to achieve their dreams," says Dennis Morey, vice president and student card product manager for Bank of America.

Most students, though, know the pros and cons of credit cards already. Andrew Moore, CSOM '12, says, "Credit cards are only dangerous to people psychologically incapable of limiting themselves; they are not inherently evil."