from the Center for American Progress:
The Young and the Indebted By Erica Williams, Tim Westrich | July 2, 2008
Kali Dun, five years out of the University of Virginia, still owes thousands of dollars to credit card companies from debt she racked up with credit cards in college. On campus, she said, “
were everywhere…like vultures. Outside of my dorm, at football games, and in the quad. I took their teddy bears, free pizza, tote bags, and complicated, convoluted sign up forms.” But along with the giveaways and incentives, she also took high fees, high interest rates, and complex terms, and by her junior year, Kali had incurred nearly $3,000 in debt on the three cards she signed up for on campus.
High fees, high interest rates, and complex terms are among the most common credit card company practices weighing down students. They’re also practices that heighten the risk of default. And default Kali did.
Kali’s story is but one of many that Campus Progress, a project of the Center for American Progress, has heard from young people around the country. It illustrates the unique challenges that college students face with regard to credit cards.
Credit card companies aggressively market to college students. Their techniques include buying lists from schools and entering into exclusive arrangements to market directly to students through the mail, over the phone, on bulletin boards, and through aggressive on-campus and near-campus soliciting—facilitated by so-called “free gifts.”
Young people face the high fees, heavy interest rates, and complex terms that all Americans who have credit cards face. Credit cards carry substantially higher costs than other forms of credit due to myriad fees and high interest rates. The result is that many students unwittingly slide deeper and deeper into debt as they fall prey to the lack of transparency in credit cards.
This situation is particularly damaging for students because, according to a 2004 study by Nellie Mae, 76 percent of undergrads have credit cards, and the average undergraduate has $2,200 in credit card debt. And whereas in 1989, 18- to 24-year-olds with credit cards devoted 13 percent of their income to debt payments—both credit card debt and student loan debt—today’s 18- to 24-year-olds devote a startling 22 percent of their income to servicing their debt. ......(more)
The complete piece is at: http://www.americanprogress.org/issues/2008/07/student_cards.html