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Sunday, Sep. 14, 2014

Students are warned about credit card usage

Wednesday, August 8, 2007

(Photo)
For college students heading out on their own, the flood of applications and pre-approved credit cards may be tempting
(Staff photo)
SIKESTON -- Along with the class schedules, housing assignments and other college information filling up mailboxes of incoming college students are a fleet of other envelopes: credit card applications.

"It's too easy for folks to get into trouble -- it's too tempting," said Eric Wooden, a financial advisor at Raymond James in Sikeston.

Taylor Allen, who will begin college at the University of Missouri - Columbia this month, said she has received about two credit card applications a week since early this spring.

Despite the temptations of pre-approved cards, she will not get one before college.

"I had a banking class and the teacher said 'hold off on the credit card as long as you can,' and I've always remembered that," Allen said.

She'll use her debit card. "It's about the same thing, but you can't overspend," Allen said.

Anna Ferrell, marketing director at Focus Bank, said that seems to be a trend.

"If the money is not there, you can't spend it," she said. "It actually will help you to establish good spending habits and stay within your budget."

Terry Williams, community bank president at Southern Missouri State Bank, agreed.

"I would highly recommend going to a bank and just setting up a free checking account that offers debit cards," he said. That way, parents can often transfer money online.

"With Internet banking, it's not hard to get money to a student if they need it," agreed Rick Adams, community bank president at First State Community Bank.

Some financial institutions now offer reloadable gifts cards.

"Instead of the parents giving them their credit card or a credit card, this is a sounder avenue they can take," said Robin Hough, assistant vice president at First State Bank and Trust. "It's just a gift card and your name's not involved anywhere."

A PIN is used to access funds, Hough continued. The cards can be used most anywhere, and money can be put on the card at anytime.

And if the card gets lost and the buyer keeps the 800 number, it can be canceled and the funds transferred, Ferrell added.

Sometimes, however, credit is a good thing to have, especially for students about to graduate and buy items such as vehicles and houses. When that happens, Wooden warned "be careful, be wary."

He compared the significance of a credit score to that of the SAT or ACT score of getting into college. "Your credit score is going to be looked at for the rest of your life," he said.

There are some tips to follow if you do obtain a card. Justin Taylor, a financial advisor at Edward Jones in Sikeston, said to just open one line of credit, as multiple cards can make someone a credit risk.

Also take a look at the annual percentage rate "The lower the better," Wooden said.

Adams suggested using credit cards like a bank account, or just for necessary items. And if one will be making Internet purchases, he advised a card with a limit below $500. "You can have ID theft with those purchases," he said.

Williams said it's a good idea to keep limits below $100 and pay off the entire bill each month if possible.

And Taylor advised parents not to cosign with their children. "The parents are then stuck paying it," he said. "You need to teach kids to be responsible."

Unused credit card applications need to be shredded, Taylor added. And before signing up for one at a booth just to get a free T-shirt, he said to learn all the details -- including the fine print.

For the most part, students should just be financially responsible and make wise decisions. She said "it's very hard to repair credit."

Source: The Capital Times

Members of Congress have recognized the problems associated with students and credit card lending practices. Coupled with high educational costs, students can fall into a downward spiral of high-interest credit card debt, said Sen. Herb Kohl of Wisconsin.

The Democrat last week introduced a bill that would require credit card companies to adhere to strict and responsible lending practices. Sen. Claire McCaskill, along with others, co-sponsored the legislation.

Under the "Student Credit Card Protection Act," young consumers would receive the following protections:

* Credit card companies would be required to verify annual gross income of a full-time student under 21

* Require a parent, legal guardian or spouse to co-sign if the student has no verifiable income

* Limit the amount of credit to a student based on annual income

* Prohibit a credit card company from issuing multiple cards to students