Swoosh! There goes another charge on that plastic rectangular card, requiring another payment — another rung entangling you in a noose that holds you captive in a place difficult to escape from.
With so many payments and so little cash, the green-colored Washington is drifting away with all the other presidents. Today’s consumers need to be aware of and discouraged from the “scan-and-go” attitude. It’s about time that credit card holders understand what is happening and the consequences of their actions — particularly college students.
According to recent statistics, credit card debt is a major issue among college students.
These debts are causing a decrease in academic performance, higher stress levels, longer working hours, higher dropout rates, depression, bankruptcy and tragically — even suicide.
Today our society relies too much on credit cards. They have become an alternative to cash, and many people don’t understand all the hidden risk factors — how interest is calculated and the range of fees involved.
Credit card companies have all sorts of ways to trap people, especially college students, with extra charges and fees.
This is why students need to be more informed about using credit cards, as well as how credit card companies are becoming increasingly creative, seeking out partnerships with third-party marketers, specifically to sign up college students.
As soon as students set foot on campus, they are lured by credit card companies with their many giveaways and irresistible offers. The temptation of free products and rewards is hard for students, who are short on cash but long on wants, to avoid. These include food, water bottles, computers and their accessories, t-shirts and iPods.
Credit card companies target college students because they are expected to have higher than average earning power after graduation, and consequently, they’re seen by the credit card companies as a desirable market.
It is also known that students tend to stay with the company that gave them their first card. However, this is dangerous for students because they do not fully understand the financial ramifications of having a number of credit cards or carrying a large amount of credit card debt.
A recent study showed that 43 percent of students that own four or more credit cards, suffer such a negative impact from them that it forces them to drop out of school in order to pay their debts. How ironic.
Card companies go after college students, anticipating their big future incomes — only to end up driving them out of school. How can a person ever repay all the debts if they drop out of school and get paid minimum wage? It is very frustrating to see the number of people struggling with this very situation.
In a Business Week article, Rep. Louise Slaughter, D-N.Y., commented, “It’s amazing to see college students coming out of school with staggering amounts of debt and credit scores so abominable that they couldn’t rent a car.”
So, many people are in a situation that will take years to get out of — if ever.
It’s not just a consumer problem. The United States economy is seriously impacted by credit card companies. Approximately two-thirds of the economic activity is consumer spending, so credit spending has been fueling the economy. The only problem is that it is not real money.
According to Newsmax.com, Americans now owe nearly as much as the estimated U.S. $1 trillion loan debt, putting a tight squeeze on the country’s economy. Citigroup alone reported a 57 percent decline in earnings due to higher consumer credit costs and said it would put aside $2.24 billion in loan-loss reserves to cover future defaults. Citigroup CFO Gary Crittenden said credit card holders are increasing their card balances, which can lead to future trouble.
But are they really incurring losses? From late fees, overdue fines and interest rates — credit card companies are profiting more than we know. It’s hard enough for experienced adults to understand all the pitfalls in using credit cards, let alone impetuous teenagers, which is why more needs to be done to educate them.
In addition, our society is conditioned to charging. Television commercials show scenes of customers disgruntled by the cash customer who slows down the usual speedy credit process.
Children, at an early age, are being trained by toy companies about credit card usage with toy marketplaces that allow them to use credit cards to purchase toys. Unlike toy credit cards that are easy to slip through the cash register, too many people are finding themselves in a situation they can’t slip out of.
What can be done to slow down this out-of-control financial downward spiral? The problem could stem from a budgeting issue and not a credit issue. Usually, people do not anticipate future expenses. We should anticipate unexpected expenses that suddenly interrupt our lives and be prepared for them ahead of time.
A stunning example of this inadequacy is a recent statement that Americans today are saving less than they did during the Great Depression. So when your car suddenly breaks down or you need a gift for an unexpected occasion—swoosh goes the credit card and you are deeper in debt.
To prevent this, keep savings envelopes for these sudden expenses. The envelopes should each have a budgeted amount of money — a separate envelope for clothes, food, car and another for emergencies. Spending only what is in these envelopes will help people keep organized and prepared for all expenses — even the unexpected.
In the end, however, it comes down to every individual needing to be completely educated about credit use, taking personal responsibility and control of their spending, and beginning a required savings and budgeting regimen. By doing this, we will be able to avoid the knots that tangle our lives. Making sure that the commercial motto “Life takes Visa”—doesn’t become “Visa takes your life.”
