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Students and Credit Cards
Parent Response
Fall 2000, the University of Minnesota was one of a number of colleges
and universities throughout the nation visited by representatives
of the Government Accounting Office to investigate use of credit cards
by students. As part of the discussion, parents on the e-mail alert
list were asked for input on their students' credit card usage. With
nearly 100 responses, University
parents addressed the following questions:
What are the benefits and costs of credit
cards for students and the University?
According to parents, the primary benefits are
- Credit cards could be helpful in emergency situations.
- They help students establish credit and learn financial responsibility.
- Credit cards are convenient and often are safer than cash.
- For students studying abroad, credit cards were described as
a necessity.
- Credit cards are useful when ordering from Internet sites.
The drawbacks include
- Credit cards can lead to a bad credit rating.
- Students could be saddled with major debts and high interest
payments.
- Financial problems could cause students significant stress and
may lead to health problems or dropping out of school.
Several parents noted that other financial options could offer the
emergency and convenience benefits without the drawbacks—checking
accounts and debit cards or a credit card in the parents' name might
prevent running up major debt levels.
Should
there be any limits on the kinds of credit cards offered to college
students or the credit limits available to them?
Almost every parent who responded noted that there should be credit
limits. Most suggested "low credit limits" and identified $500 to
$1,000 maximum levels. A few parents responded that credit card companies
were responsible for establishing any limits based on the recipient's
income and ability to repay debts. Several suggested that students
should begin with a low rating, but as they proved their ability to
manage their use of the card, the limits could be increased.
On the whole, do you believe that college
students use credit cards responsibly or irresponsibly?
Although a significant number indicated that they think most students
are responsible, the majority said that students cannot handle credit
cards responsibly. Approximately 15 percent indicated that their U
of M student or another of their children had been in financial trouble.
According to parents, one of the best ways for their student to learn
about financial pitfalls was to watch as an older brother or sister—or
a parent—struggled to get out of debt.
To what extent do you or did you, as
parents, discuss financial issues with your children?
Almost all parents indicated they had talked to their students about
financial expectations and use of credit cards. Several parents noted
that they eased their student into financial responsibility by supervising
finances closely for a year or more. Some approved a credit card and/or
checking account while their student was in high school, then went
over monthly statements with the student to illustrate the benefits
and drawbacks. Many have their student's credit card bills sent home,
and the parent will pay for certain items, such as food, books, and
educational costs. The student, then, is responsible for any other
expenses. At the other extreme, others were alarmed to find their
student had multiple credit cards and overextended credit. They had
no idea their student was in debt.
What responsibility do you think
the University should have for financial (debt management, loan, credit
card) education?
Responses ranged from the University being entirely responsible for
financial education to the University holding no responsibility for
students' financial education. The vast majority of respondents, however,
indicated that financial training was the parents' responsibility,
and a considerable number were quite specific that "the University
has enough to do;" "the University's job is to provide an academic
education;" "it is not the University's job to teach financial responsibility."
At the same time, however, the majority indicated they felt it would
be helpful, useful, or wise for the University to provide at least
some education about finances. Most respondents noted that while it
is the parents' responsibility to talk to students about finances,
students sometimes learn more by hearing another student describe
her or his experience. A University session, they said, might reinforce
the message.
Many parents expressed frustration at the number of credit card applications
their students receive in the mail and bonuses offered on campus for
signing up for credit cards. University policy is that sales or giveaways
of any product must be under sponsorship of a student group and connected
with a campus event. Unfortunately, vendors often set up without permits.
We do instruct them to leave when we see them.
Parent comments |
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