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11 October 2007 @ 11:58 am
 
I'm of two minds about the newest crisis du jour thats been in congress and the papers lately: the growing number of college kids with excessive credit card debt.  Actually, I'm of three minds.  I'm not even sure it is a crisis...

The gist is that lots of college kids are graduating with mountains of credit card debt, more so than any generation before them.  The argument is that credit card companies are becoming more and more unscrupulous, telling pushers to lie about how easy bills are to pay back, giving out cool stuff like frisbees and tshirts, and doing their own version of predatory lending by marketing cards that are far from ideal to the students who would use them (who could qualify for better rates, no annual fees, etc.)

Now I'm not going to argue with that.  Card companies need to be reigned in, but I dont think it is because of the marketing; our generation is surrounded by it.  Try going a day without seeing a coke or pepsi ad.  I dare you.  What people need to pay attention to instead are the more dangerous and legally questionable practices, like double cycle billing (charging you interest even if you paid everything back by averaging out balances), raising your rate even if you've always been perfect because you were late with a completely different credit card, or just raising your rate whenever they feel like it.  They also like to hide in states like Delaware, where usury laws don't have a cap on interest rates (unlike most states which do have caps).  Information is hidden and written in legalese, and there is almost no oversight in the industry.

But no, people are worried about the number of fliers on campus or the free tshirts.

Implicit in this assumption (that the marketing is to blame) is the idea that this generation is stupid, that we can't do a basic cost benefit analysis.  Granted, this may be true, but it doesn't change the fact that the wrong thing is being corrected.

But at the same time, cards dont use themselves.  In order to rack up debt, you need to use the card and not pay it off.  You don't spend more than you have, and if you can't pay off your card every month, budget yourself and pay it off as soon as you can.  So poor john smith, who had to drop out of school to pay off his $20,000, you aren't going to get much pity from me, even if you did get an unfair APR.

The last question is, is this even the crisis it is made out to be?  Of course "record" numbers of people are graduating with credit card debt, because "record" numbers are getting credit cards.  The business week article even acknowledged that a generation ago, it was rare for a college student to have a credit card.  The numbers look big, but show me penetration rates!  The numbers are not comparable!

(although gee, i wonder if the gobs of debt my generation is carrying has anything to do with skyrocketing education costs?  look at the percentage of students who graduated in debt 40, 20 years ago, compared with graduates in debt today.  its depressing)
 
 
 
Samsamtaro82 on October 11th, 2007 06:49 pm (UTC)
AMEN. What you say about cards and rates and legalese is true, but like you said, it's the card user's fault for racking up debts they can't pay. College kids need to know that a credit card is not a magic thing that gets you stuff for free. I mean...some of us learned this, but clearly some people haven't been properly educated.
And also, yes, shouldn't people be more concerned with the fact that kids are ALSO coming out of college with tens (or hundreds) of thousands in debt?? When I tell people over here how much money I owe to the US government for my college debts, they usually get this look on their faces like they're going to barf, 'cause university is basically free over here. And I'm one of the lucky ones - I only have about 40k in debt for two degrees. I sort of got boned on both ends - I've got the US college debt, but I've got to deal with German working standards, which means you are an intern for at least a year or two before you get an actual job. It's totally lame. :D