Anna Martinez, "Extra Credit" You Can Live Without

There is a dangerous product on our campus. It is marketed on tables outside of the student union and advertised on bulletin boards in this classroom. Based on my audience survey, it's likely that many of you contain this particular product in your possession right now. By the end of my speech, this product might be costing you more than it is right now. This dangerous product is credit cards.

Today, I'd like to discuss the problems created by college student credit cards, and hopefully persuade you to be a more careful credit card consumer. If your credit card situation is anything like mine--and over two-thirds of this class said that they are carrying a balance on one or more cards--take note: you can save money! My husband and I paid for our own wedding last summer and thanks to Visa, we're still paying for our wedding! We've saved money with some of the suggestions I'll present to you today, and you too can do the same.

To that end, let's cover some of the problems created by student credit card debt, then analyze the causes of the problem, and finally consider steps that you can take to be a more careful credit card consumer.

We'll start with a look at the problems created by these "hazardous products." Credit-card debt on campus is a significant and growing problem.

Many students have credit card debts. This claim is supported by the analysis of Alan Blair, director of credit card management for the New England Educational Loan Marketing Corporation, whose 1998 report on the Corporation's Web site stated that "sixty-seven percent of undergraduates who have applied for student loans have credit cards. Fourteen percent have balances between three and $7,000 and ten percent have balances over $7,000." Visa must not be the only card they'll ever need because Mr. Blair reported that 27 percent of undergraduates have four or more cards.

There must be plenty of businesses that "do take American Express" and any other card. Sharon Gerrie, staff writer for the Las Vegas Business Press, September 4, in 1998, reported a National Center for Financial Education survey indicating an average undergraduate credit card debt of $2,226 in 1997.

High credit card debt can change your life for the worse. Business Week, March 15, 1999 provided an example of how high debt can change a college student's life for the worse. Jason Britton, a senior at Georgetown University, accumulated $21,000 in debt for over four years on sixteen different cards! Jason reports that "when I first got started, my attitude was 'I'll get a job after college and then I'll pay off all my debt.'" Then he realized he was in a hole because he couldn't make all the minimum monthly payments. He had to obtain financial assistance from his parents and then work three part-time jobs.

Robert Frick, associate editor for Kiplinger's Personal Finance magazine, March 1997, states that if you make the minimum payments on a $500 balance at an 18 percent interest rate, it will take over seven years to pay off the loan and cost $365 in interest. If you maintain the average balance I previously documented, $2,226, the interest for one year at 18 percent would be $400 and 68 cents.

High credit card debt can also haunt your finances after you graduate. When you put credit card debt on top of loan payments, rent, utilities, food, the payment on that new car you want to buy, family expenses, etc., the toll can be heavy. Alan Blair's previously cited 1998 report notes serious consequences for students who can't balance monthly expenses and debts, including poor credit ratings, inability to apply for car and mortgage loans, collection activity, and, at worst, a bankruptcy filing.

Don't let this happen to you. After all that hard work earning a degree and finally landing a job where you don't have to wear a plastic name tag and induce people to get "fries with that order," the last thing any of us needs is to be spending our hard-earned money paying off debt, being turned down for loans, or worse yet, being harassed by collection agencies.

Credit-card debt is hazardous to students' financial health, so what can we do about it? My proposed solution is to be a careful credit card consumer. Why not get rid of your credit cards before it's too late? Here's my credit card and a good pair of scissors. I'm gonna cut this card in half. [sound of cutting] I have a good pair of scissors over here—-why don't you get your cards out and do the same? All right, so, maybe you won't go for that solution.

My survey indicated that most of you enjoy the flexibility in spending that most credit cards provide. I have a confession to make: this is an expired card that I just cut. Not gonna be cuttin' my new card either.

So here are some other ways that you can be credit card smart. One practice is to keep--to shop carefully for the best credit card rate. The companies that are not spending their money giving away free pizzas and t-shirts on campus may be able to offer you a better deal.

A second solution is to read the fine print on actual credit card applications to learn what your real interest rate will be. Here is an example of the fine print on an ad that begins at 1.9 percent and soon rises. [visual aid showing the teaser rate and fine print] If you compare the bottom fine print of this ad with the top part, you'll notice that the rate rises by 20 percent.

Third, even if you can only make the minimum payments on your cards, pay your bills on time. Kiplinger's--Robert Frick's previously cited 1997 Kiplinger's Personal Finance magazine article—-advises that "a strong credit history can mean lower rates on loans and brownie points with employers, landlords, and insurance companies. The best way to build good credit is to use the card, ideally making several small transactions each month and then paying off the bills on time or even early."

Take responsibility and find out when your bills are due. Credit-card companies are even less tolerant of excuses for lateness than speech instructors! Business Week, March 15, 1999, cautions that "because students move often and may not get their mail forwarded quickly, bills can get lost. Then the students fall prey to late fees."

Even if you don't want to cut all your credit cards in half, there are many ways to be a careful credit card consumer. Shop for a good rate, be careful to read the fine print so you know what the rate really is, know what you owe, and take the responsibility to make the payments on time. Keep tabs on your credit report to ensure that other creditors aren't talking trash about you.

This morning, we've learned about a very hazardous product on our campus--credit cards. We've noted the problem of high student credit card debt, analyzed some of the causes of the problem, and finally, suggested some solutions for being a careful credit card consumer.

If an instructor offers you a chance for extra credit in his or her class, take advantage of the opportunity. But when a credit card issuer offers you a free t-shirt or phone card for you to sign up for their extra credit, just say no. When you pay off a credit card with a 19.9 percent interest rate, that "free" t-shirt could turn out to be the most expensive article of clothing you'll ever buy.