Feds get credit for taking credit

Taking effect Feb. 22, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 will restrict anyone under 21 years of age from getting a credit card without a cosigner, unless they can prove they have a job and can handle payments on the card.

The new law also prohibits credit card companies from being within 1,000 feet of a campus when giving away free products to get students to sign up for their product.

Julia Heath, professor of economics, said the new law will help students, and The University of Memphis has not allowed credit card companies on campus for a while.

"We know from a lot of research that students are not very financially literate," she said. "Universities typically lose more students because of debt issues than they do because of poor academic performance."

Today, 84 percent of undergraduate students have a credit card, according to a national survey by private student loan company Sallie Mae.

Professor of economics Douglas Campbell said there is a reason why credit card companies set up on campuses.

"You don't see them with tables set up downtown offering free pizza and t-shirts," he said.

Campbell said students are not always fiscally sound and, though credit cards have the potential to help, they also have serious consequences students should consider first.

"College students tend to make good decisions but there's a lot to know. I'm an economist and I don't know everything I need to know," he said. "Credit cards weren't always passed around like confetti in a parade. They used to be given to people who proved they could handle it."

Tanasia Perkins, freshman accounting major, said she doesn't think she could handle having a credit card.

"I would max it out," she said. "I just use my debit card. A credit card is easy money that's not really yours. With debit, you know not to go over your limit because the money comes out immediately."

Senior business management major Daniel Millican has three credit cards. He said he thinks he's responsible with them, using them only for major purchases.

The first he got to buy a computer, the second because it had a "good" student interest rate (5 percent) and the third, a Wal-Mart card, because he frequents the store.

"I always make sure I'm not at a point where I have to resort to using a credit card where I could have used cash," he said.

Heath said students are vulnerable to credit card pitches because they are often away from home for the first time, but that financial literacy can help.

Lakisha Gray, freshman nursing major, signed up for a Victoria's Secret "Angel" card not long after she turned 18 because she thought it was pretty.

"But when I use the card, I don't buy a lot of things," she said. "I always check my account and wait until all the pending (balance) is out before I spend again."

"Financial education programs, if done correctly and by someone who is not trying to sell something, can be very effective," she said. "Sometimes just teaching students how to think through a decision is life-changing in terms of how they apply that to their financial life."

Students looking to be better financially informed can visit The U of M's Center for Economic Education website where there is an online program that gives a tutorial on credit cards.

According to the website, 45 percent of college students are in credit card debt averaging $3,066.

Ronald Spahr, chair of the finance department, said a personal finance course is offered at The U of M and there is a possibility that it will be integrated into the general education program. 

Spahr said the material taught in the course is something students could use for the rest of their lives.

Perkins said she would not mind taking a financial literacy class.

"It's always good to know how to spend money," she said.