English 101 Paper on Credit Cards and College Student Debt

Credit Cards and College Student Debt

Despite the efforts made by the lawmakers to bar students from gaining credit cards from banks, the affair remains a major challenge since most students do not understand the fundamentals of credit cards use. The levels of financial literacy are still low even among students pursuing business and finance-related degree courses. A huge student population operates credit cards in the U.S., but less than 10% of them are capable of paying their monthly balance with the majority of them not aware of their interest rates and other costs such as over-limit fee amounts (Time n.d.).

The ignorance of credit card knowledge by most students even those pursuing business and finance-related degree courses is by choice. Since they are college students, they should be in a position to understand these concepts. For example, most of them do not read their bank statements. With regard to the specific demographic groups of students and their knowledge on credit cards, the researchers found out that the students who had taken business law or Ethics courses were more knowledgeable than others from other courses (Time n.d.). This brought forth the perception that Ethics students were exposed to stories of the financial crisis, which entailed the discussion of credit cards.

Given that students who should be presumed to understand the financial knowledge regarding credit cards do not have a good comprehension of the same indicates that there exists little literacy among the uneducated populations. This calls for the college students and the college outreach program to train people on the cost implications of running a credit card. There are long-term implications of this financial knowledge lapse because it would be literally impossible to tackle the financial challenges that one faces without understanding the underlying concepts in the first place (Times). Most people seek to settle on options of improving their credit card score rather than contemplating on the terms and conditions involved. Most graduates find themselves in financial crisis long after clearing their college education. However, in most cases, this is their self-inflicted pain.

On the other hand, the concept of students accessing credit cards can be challenged by the view that these young adults need to be exposed early enough to learn the tactics of credit and debit if they are to build their own financial future. The main reason is to enable one develop card-responsibility early in life; therefore, parents should be actively engaged introducing their children to credit cards while they are in college. According to Randy Hopper, the vice president of credit cards at the Navy federal Credit Union, “With proper guidance and planning and budgeting, the opening of a credit card can be useful for young people to plan their spending responsibly.”

Given that the law prohibits those below the age of 21 years unless they are working and earning or have a co-signer, a parent may choose to have a child as an authorized user so that he/she can monitor the child’s spending habits (Fox Business n.d.). Here the parent will have control over the card and can even withdraw the authorized user at any time. The following reasons depict why it is important to grant college students access to a credit card. Prospective employers, landlords, and even cell phone service providers may need a credit report as a background check of one’s ability to manage their credit issues (Time n.d.). This aspect can be difficult to prove unless one operated a credit card. With positive credit report, young people will get adult favors. Therefore, it is the interest of any young person to work towards an end game such as owning property or buying a car. All these call for an impressive credit file. In order for one to access capital for entrepreneurial purposes, one needs to have an established credit card history showing one’s use and ability to repay, which is used to demonstrate his/her ability to borrow and repay (Fox Business n,d,).

Parents can be able to monitor the monthly spending habits of their children by analyzing the monthly reports rather than letting them accumulate the debts too high. This can be through minimizing the credit range with the help of the credit issuer. Further, credit can be considered as a safeguard in case the student runs into an emergency that needs cash while away from home, for instance, a car breakdown or unexpected medical emergencies (Time n.d.). Parents can thus be at ease knowing their daughter or son can get out of simple financial needs at any given time and with convenience.

In conclusion, by outlining the terms and conditions under which students acquire credit cards and guiding them through the process of using their credit cards, they adapt with time and start practicing informed financial habits that will help them achieve financial success in future. The college students take advantage of rewards associated with cash back or other reward programs (Fox Business). Such programs apply to those who punctually pay their monthly debts in full. When shopping for the card, student’s  should, for example, be encouraged to look for simple products starting with preference to those that have good rates and no fees thus acquiring cards that attract financial rewards through bonuses.

 

 

 

Works Cited

“College students Are Credit Card Dunces.” Time. April 12, 2012.

“4 Reasons Why College Kids Need Credit Cards.” Fox Business. August 01, 2014.