Teenagers and their Credit Cards
Availability of credit cards have left young people in debt. College-age students and low-income consumers, typically deemed bad risks, are easy targets for credit card companies. Credit card companies should not target college-age students and low-income consumers because of their lack of financial stability. In 1996, twenty-something consumers owed an average of $2,400 on their credit cards, nearly triple what they owed in 1990, according to research by Claritas Inc., a marketing research firm in Virginia. If, payments of $75 were made monthly to pay off a $2,400 debt, it would take 3-1/2 years with a 16 percent-rate card, and you'd pay $ 750 in interest.
"There's no question that young adults are the most heavily burdened by credit card debt," said Stephen Brobeck, executive director of the Consumer Federation of America. Many will plunge into debt. Many teens waste little time taking on debt after leaving home. The number of 18 and 19 year olds with credit cards in their own name is climbing, according to Teenage Research Unlimited. Of American teen between 18 and 20 years old, 41 percent have their own cards, compared with 36 percent last year.
Across all age groups, the statistics don't paint a pretty picture. Bankruptcy fillings in the United States have more than doubled in the last decade, from 530, 436 in 1986 to 1.2 million last years. Americans owe $ 484.6 billion in credit card debit, up from $ 437.9 billion in 1996, according to the Federal Reserve Board. That National Foundation for Consumer credit, with 1, 300 offices nationwide, helped 1.3 million consumers last year pay off debt, a 20 percent increase over 1995.
Most students don't realize the hole they are digging during college but realize it when credit reports are pulled for job applications or when they try to purchase a home or car. The problem starts when a teen gets a credit card with a parent as a co-signer. That allows the teen to build a good credit history, so that by the time he or she graduates and gets a job, credit card approval is no problem. Many teens become overextended and eventually find themselves with poor credit.
More parents than ever are sending their teenagers to shopping malls and movie theaters with a piece of plastic instead of pocket change. "Marketing to students is definitely working, as many of them end up signing for as many as five to six credit cards," say Don Blandin, president of the American Savings Education Counsel (ASEC). A 1999 survey by ASEC found that 55% of all college students and 7% of high school students have a major credit card. And nearly a third do not pay their bills in full each month.
Experts don't agree about when and how to introduce kids to credit cards. Teens younger than 18 can only get a credit card if their parents co-sign for it.
Credit card companies are courting increasingly younger customers who are all too eager to flash their plastic. (Polto 111) Given the choice between cash and credit, teens increasingly love to flash plastic. Credit card companies are aggressively pursuing teens at school, on television and in their mailboxes. About 11 percent of the teen population which numbered 31.3 million in 1999, either have their own credit card, or one that is co-signed with their parents. That has grown from 8 percent five years ago. According to Teen Research Unlimited in Northbrook, Ill, "Teens are reluctant to swipe those magnetic strips, either. While teens make up just 11 percent of the population, teens spent an estimated $ 153 billion last year." Frank Torres, legislative counsel for Consumers Union, the advocacy group that publishes CONSUMER REPORTS magazine, said, "Visa and other credit card companies are not altruistic organizations" and suggested that credit cards are "designed to get the young people of this country addicted to plastic."
In a Discover card commercial aimed at college freshman, parents send their children to college with a credit card for just emergencies. The child is confronted with a meal situation; the child uses the credit card. Afterward, we see the child pull out the card several times for fancy clothes and stereo equipment, only to receive a surprise visit by the child's frowning parents.
Many do not understand how credit cards work, there's a catch like hidden fees. If you are not careful, the credit card company is going to charge you somehow. We have all been traumatized by the credit card industry.
No matter the situation everyone entering college will face credit card tactics. Major credit card companies have yet to realize whom they should target. Targeting young people might seem right, but it is actually wrong. We all have different opinions about credit cards and how they should be used. Sometimes, we fail to realize the interest rates and annual fees we end up having to pay.
Credit cards tend to destroy your credit report if you do not use the card and pay back the money quickly. One time or another we have all being suckered by the major credit companies. Everyone is interested in improving credit history. Companies use "credit report" as a tactic to bring more companies. Our society today, believes on a principal of credit, any major purchases result in a credit check. College life is expensive and requires a lot of money. Most college students require money for a decent car and money for minor expenses while in and out of school.
The thing that we tend to forget is the cost of just carrying around the card. Interest rates can cause a person to be depressed or stressed out. Depression and stress is the third cause of death in the United States. We should take our time in deciding on which credit card we should invest and use.
Credit card companies should not target teenage students, even if the student has not established credit, the company should try to work with the parent instead of solely the student. I feel as though college students have a lot of stress already from work, credit cards only add to the stress. Students leaving college should be targeted. Students leaving college would be the ones that start making the money with their degree.
Works Cited
Evans, David, Richard Schmalensee. Paying with Plastic: The Digital Revolution in Buying and Borrowing. Massachusetts: Massachusetts Institute, 2000
Citibank. Citibank, Nader and the Facts. New York: First National City Bank, 1974.
Kaminow, Ira, James O'Brien. Studies In Selective Credit Policies. Philadelphia: Federal Reserve Bank, 1975.
Mandell, Lewis. The Credit Card History: A History. Boston: Twayne, 1990.
Manning, Robert. Credit Card Nation: The Consequences of America's Addiction to Credit. New York: Basic Books, 2000.
Polto's, Pearl, Bob Oskam. Easy Guide to Good Credit. New York: Berkley Books, 1990.
Wood, Oliver, William Barskdale. How to Borrow Money. New York: Van Nostrand, 1981.Partner sites: Spanish school Costa Rica, Skin Cancer, and Free Essays and Term Papers