Straight Talk on College Credit Cards
By: Brian O'Connell

With college acceptance letters tucked away, and high school seniors dreaming about being on campus next fall, the topic of conversation in U.S. households could turn to credit cards.

Specifically, how to get the best one for your college-aged son or daughter. Before you make a decision, though, you’ll have to separate fact from fiction.

First, arm yourself with some key statistics. According to the Federal Reserve Bank of Boston, the average age of a first-time credit card owner is 20.8 years — prime college years, demographically.

Some other key college-aged credit card owner data include:

  • About 84% of students have credit cards, an increase of approximately 11% since the fall of 2004, according to 2009 figures from Sallie Mae.
  • Only 2% of undergraduates had no credit history (also from Sallie Mae).
  • Sallie Mae also says that about 50% of college undergraduates had four or more credit cards in 2008 — up from 43% in 2004 and just 32% in 2000.

Now back to the “fact or fiction” issue. While credit cards are increasingly a common occurrence on college campuses, some myths still endure. Let’s puncture a few of the most common ones:

Who’s responsible? Despite conventional wisdom, it’s not the parents who are responsible for their college-aged kids' credit card bills. As long as the collegian is 18 or older, and the parent didn’t co-sign for the card (a big caveat), then all debts accumulated on the card belong to the student.

College cards don’t translate into big balances. Not exactly. A 2009 Sallie Mae study reports that the average college-aged credit card owner’s debt balance is $3,173. That’s 46% higher than the $2,169 figure back in 2004. As most college students don’t have full-time jobs, that’s an alarming figure.

Expect higher interest rates. That one is true. While the average cardholder with decent credit can get a credit card with an interest rate of about 10% to 12%, college students face higher interest rates of up to 16% or even 18% in many instances. (Get the best credit card rates at

“Mom, I need a credit card to establish credit.” Nope. College students can beef up their credit health through secure prepaid credit cards, where fees may be higher, but balance ceilings are lower, so your teen can’t get in a lot of financial trouble. College students can also use debit cards (linked to their bank checking accounts) to help establish credit.

Credit card companies are unscrupulously targeting college students. While this may have been true in years past, card companies are backing off from aggressively courting college students. Part of this trend is from the CARD Act of 2009. With new laws in place, credit card companies can’t offer free merchandise to get students to sign up for a card on college campuses or at college sporting events. Also, credit limits for college-age cardholders are lower — about $500, or 20% of the student’s annual income.

It used to be that credit card companies figured that a good customer was one who could pay his or her debt. But in the past decade, that scenario has changed — cardholders who can’t pay were viewed as good customers (that’s how card companies could rack up so much cash in fees and penalties.)

College-aged cardholders certainly fit the bill in that latter category. But with lean economic times comes a new, austere perspective on credit cards among American families. And that means a more careful, more cautious and more parsimonious outlook. And that’s a good thing.

—For more ways to save, spend, invest and borrow, visit

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