College students across the United States are familiar with credit card debt, and with the cost of higher education increasing, debt of any kind is not foreign to Texas Tech students, either.
However, much different from student loans taken out to cover expenses such as tuition, textbooks or housing, a growing number of students are using credit for luxury items.
Regardless of what credit is used to buy, Sergio Garcia, a coordinator for Red to Black at Tech, said he has seen many students using credit without credit card knowledge.
"Credit card companies are not always open about the details of the card," Garcia said. "Grace period, interest, potential fees, credit limit, just acknowledging the fact that you have to pay these things back - some people don't know that."
Merril Currier, branch manager of the Tech Federal Credit Union and recent Tech graduate, said she agrees credit cards are usually the best way to build credit. However, she sees many students struggling with credit because of a lack of education.
"Some finance or business majors know about how credit cards work, but others, even some adults, aren't," he said.
Garcia admits some students who come into Red to Black for financial advice do not understand the basics of credit. However, he believes Tech students, overall, are well educated about money, though he suggests becoming more educated before applying for a credit card.
Looking back at his finances, Currier said he agrees he may have made some unnecessary purchases.
Garcia said that for a lot of people attending college, their first credit card comes from special promotion to students.
As a student teller at the Tech Federal Credit Union, Mindy Thomas said she applied for a credit card to receive a free T-shirt.
Currier said he recalls credit card companies offering students gifts in exchange for applying for credit while he was attending Tech. However, he never obtained a credit card this way.
Even though some students receive credit cards before leaving home for school, many students acquire cards through special promotions set up by banks or credit card companies. To a certain degree, Garcia said, credit card companies prey on college students.
"Honestly, they're an easy target," he said. "They are financially uneducated, and being that it's usually their first time away from home, they have no reason not to."
Banks and credit card companies encourage students to apply for credit cards through special promotions that offer applicants free meals, T-shirts or other items. Marketing to students by offering incentives up front gives credit card companies a chance to grant credit to students who may not hesitate to charge without considering interest or additional fees.
Matt Ducatt, managing director of Student Union and Activities, said credit card companies are not given permission for grounds use at the university. However; credit card companies still manage to place promotional flyers on vehicles parked on campus, encouraging students to apply for credit cards.
When credit card companies operate in this manner, Garcia said he believes students do not take into account other issues surrounding credit.
"The big draw is not the credit card, but the freebies that come with it," he said. "They just see it as signing their name down on the list."
Tech FCU offers credit cards to Tech students without special gimmicks or promotions. Students applying for a credit card at Tech's FCU are encouraged to have a source of income, or have their parents co-sign on the account with them, according to information provided by the credit union. Doing so allows students to use a card with 11 percent interest, compared to the 18 or 19 percent Currier said he remembers having as a student on his Bank of America card.
Credit cards are a form of revolving debt, where the balance each month varies based on shopping activity from the previous month. Unlike installment debt, which has fixed payments, revolving debt will differ depending on what is charged from month to month.
Currier said revolving debt is a dangerous kind of debt, especially for students who have maxed out their credit cards. He believes it is easier for individuals to budget a set payment each month than to pay back money they have already spent.
Students who apply for credit to receive a free gift should be aware that applying for cards could still affect credit history negatively, even if the card is canceled before use. Students' credit history will follow them through adulthood and could lead to trouble purchasing a home or car, sometimes even being hired after graduation. As adults, individuals who have been delinquent with payments may face difficulty being approved for loans, or higher interest rates than someone with good credit history.
Being irresponsible with credit has far-reaching repercussions. Other than the fact that credit delinquency affects credit scores, students also should be aware of the growing problem of identity theft.
"If you have a lot of credit cards attached to your name, you're more likely to be a victim of identity theft," Garcia said, adding that the risk is even higher for students who frequently move, inevitably leaving mail behind that contains personal information.
There are a large number of students who feel that having a credit card is important to the process of establishing credit. However, there are other ways to establish credit.
"If you are mature and able to handle the responsibility of using credit, it's a good idea . . ." Garcia said. "If not, you should learn and understand the way credit works first."
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