Straight Talk Bob McDonnell

According to a survey of student loan applicants by loan provider Nellie Mae, 83 percent of college undergrads use credit cards and the average card debt was $2,327 in 2001. Furthermore, the college students surveyed steadily increased usage rates and balances. From freshman to senior year, the average debt load more than doubled and number of cards held nearly tripled.

It’s easy to see why more students drop out of college because of debt than for poor grades.

But don’t forget that credit cards are designed for people with income — solid cash flow. Most young teens and college students don’t have much income. While using credit is not a beginning financial skill, teens do need to learn how credit works.

How can parents ease young teens into the eventual freedom of credit cards? Allow a debit card tied to a checking account or a fixed-amount card such as Visa Buxx, designed especially for teens. Or, try a credit card with parent supervision and low limit — $500 or less.

Before teens become regular credit users or abusers, encourage them to:

1) Master a checking account, write checks, and reconcile statements.

2) Show responsible debit card use and understand ATM fees.

3) Compare credit card offers and read the fine print.

4) Understand interest rates and billing cycle.

Credit cards do remain an attractive alternative to cash for four reasons, providing it’s used wisely.

1) Credit is handy — and safer — to carry. If teens don’t ever see cash leave their wallets, however, it’s difficult for them to understand the reality of expenses, budgeting, and cash flow.

2) Buy now, pay later. Paying later also makes it easy to overspend, and not be able to pay when credit card bills arrives. It’s not easy for anyone to have the willpower to curb credit card spending once the habit is started. Teens need maturity to overcome the “I-want-it-now” syndrome.

3) A credit card is good for emergencies, when you have no cash. But buying daily lattes, new clothing every trip to the mall, or pizza on weekends doesn’t count.

4) Using credit establishes a credit score. Yes, frequent use of a credit card does build a credit history — good or bad. But overspending and irresponsible use can tarnish a credit score for years and affect interest rates for future loans.

• Bob McDonnell is executive director of Arizona College Planners, L.L.C., a member of the College Planning Network, the National Association of College Funding Advisors and the National Association of College Acceptance Counselors. For questions, email

(1) comment

Kate Smith

Students also have expenses and some of them they prefer to cover with their credit cards. I think they have to be careful, it’s very easy to get into huge credit card debt, because when they purchase something with a help of their card, they do not feel that they use cash and do not think that it can lead to financial problems. I am sure that credit cards are intended for people with income, the same is with payday cash advance, this service is intended for students who have regular income and able to pay back. It’s not right that people with no income can borrow, it get them into the debt they can not repay, so student should be very careful with credit card using and remember that they risk to harm their credit scores in case the debt will not be paid off.

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