If you've got a child going off to college this fall, you'll be interested in -- and perhaps alarmed by -- this statistic: 36% of college students in this country report that they have over $1,000 in credit card debt. That's according to a recent survey by AIG and EVERFI.
College students are popular targets for credit card companies -- particularly those who've turned 21. They aren't required to have a regular income to qualify for a card without a co-signer.
However, even 21-year-olds may not have enough financial intelligence to handle a credit card responsibly. They can fall into the habit of putting everything on their credit card -- from groceries to clothes to spring break expenses. Before they know it, they owe more than they can pay and they're racking up interest.
According to the Federal Reserve Bank of New York, more than 8% of credit card balances for people between 18 and 29 were at least 90 days overdue in the first quarter of this year. An official with the New York Fed says, "The rate at which credit card balances become delinquent has been rising and that has coincided with an increase in younger borrowers entering the credit card market."
Many college students are graduating with significant credit card debt in addition to their student loan debt. Figuring out how to make those payments while paying for rent, food and other living expenses can send them back to Mom and Dad's house.
Experts say it's best to focus on paying off your credit card debt over your student loan debt because interest rates are higher, but you shouldn't neglect your student loan payments. They recommend setting a date by which you intend to have your card(s) paid off and plan your budget accordingly.
It's a good idea for parents to talk to their college students about the dangers of credit cards. If they're old enough to get one on their own, make sure they understand how it works. Getting into serious credit card debt at a young age can have an impact on their credit score that it can take some time to recover from.
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