As your State Treasurer, I have developed various financial literacy programs to benefit Kansans of all ages. From free financial planning seminars and monthly newspaper articles to online resources such as Kids Zone and Money Wise, Kansans may choose from a number of unique educational tools. My office has assisted pre-teens with saving their allowance and educated our senior citizens about estate planning. Beginning this month, we will begin talking with college students about the advantages and disadvantages of credit cards.
Not long ago, credit cards were reserved for those who could prove that they had the income and self-discipline to manage credit. A college student definitely could not obtain a credit card unless a parent co-signed. Those days are over. In the past 10 years, the stereotypical financially struggling college student has been replaced by a credit card wielding young adult who wants for nothing. Credit cards have given students financial freedom-freedom to purchase clothes, electronic equipment, and exotic spring vacations. But many question whether that freedom has come at too high a price-increased bankruptcy filings among young adults, students being forced to drop out of school because of debt, and students graduating with enormous debt.
Nellie Mae, a nationally respected student loan corporation, found during a recent study that:
Eighty-three percent of undergraduate students have at least one credit card.
Average credit card balance is $2,327
Twenty-one percent of undergraduates who have cards, have high-level balances between $3,000 and $7,000.
Graduating students have an average of $20,402 in combined education loan and credit card balances.
Students double their average credit card debt - and triple the number of credit cards in their wallets - from the time they arrive on campus until graduation.
Students who reside in the Midwest have the highest incidence of card ownership with 88% holding at least one card, 53% having four or more cards and the average number of cards being 4.93 per student. In addition, they have an average balance of $2,478.
Credits cards are a valuable resource to many families while their children are attending college, but students should be encouraged to use them wisely. They need to understand the financial ramifications of using a credit card so they can make better decisions based on the true costs of a credit card.
The ABCs of Credit Card Finance is a credit card literacy class distributed as a public service by my office and developed by the Center for Student Credit Card Education, Inc., made possible by Citibank Credit-ED. Some important dos and don'ts to share with students in your life include:
DO:
Do limit yourself to one card.
Do remember that credit cards are a convenience.
Do pay your credit card bill in full each month or at least always make more than the minimum monthly payment.
Do manage the credit card account like you manage your checking account.
Do pay the bills on time.
Do mail your payment as soon as you receive your statement.
Do keep your credit card receipts.
Do notify your credit card issuer immediately if you move.
DON'T:
Don't use your credit card for tuition and school related expenses.
Don't skip payments, even if your credit card issuer says you can.
Don't exceed your credit limit.
Don't withdraw cash from the credit card account.
Don't use courtesy checks.
Don't use one credit card to pay another.
Don't rise to the occasion when your credit card issuer gives you an increased credit limit.
The ABCs of Credit Card Finance class is important for all Kansans, but especially our young Kansans going out into the world for the first time by themselves. As parents and our children's first educators, we owe it to them to make sure they are making the correct choices that will guide them down the road of financial independence.
I am looking forward to the upcoming month and hope to meet many of you. It is my honor to serve as your State Treasurer.
