NEW YORK -- Back to school, for the modern student, means back to charging up a storm on credit cards. More than half the 9 million full-time college undergraduates have cards today, Visa reports. They're issued even to students who have no credit history and little income.
Many students use their cards responsibly. Assuming you're not a serial shopper, it pays to get a card when you're in school. You'll never again be accepted for credit on such easy terms.
But some students go so far into debt at so early an age that they ruin their credit history even before they graduate. For students with no income, credit limits should stay low. But many issuers seem to count on the parent to stand behind the student's bills -- even though the parent doesn't co-sign the application and may not even know the card exists.
Amy Eskind, a reporter for this column, posed as a student to sample an on-campus charge-card sell at Vanderbilt University in Nashville, Tenn.
She asked the representative for American Express what she should list as her annual income on the application. The rep told her to count not only her income from part-time jobs but also the value of her room, board, tuition and any allowance she got from her parents -- suggesting $25,000 to $30,000 in all.
This effectively finds her creditworthy by drawing on her parent's income. American Express spokesman Bill Moss says that a student's "income" does indeed include all sources of support, including money from parents. He adds that AmEx doesn't assume that the parents will pay. But that sounds pretty disingenuous, when parental support is part of the credit-granting process.
Some card issuers ask flat-out for the parent's income, even though students can get the card without a parent's knowledge or consent.
Michele Bedell, a former Radford (Va.) University student who testified last March at a congressional hearing chaired by Rep. Joseph Kennedy, D-Mass., told of signing up for a Visa and a Discover card, each with $500 credit limits. Before long, her limits went to $1,000; one card even took her to $1,500. Her spending rose, too, until she could no longer make the minimum payments.
Even if she could, paying the minimum is a loser's game -- which no one ever told Michele. Ruth Susswein, executive director of the Bankcard Holders of America, says:
"The student who racks up a $1,000 credit card bill her freshman year, and only pays the low, low minimum each month, will finish her bachelor's degree, complete her master's program, finally begin earning a living and still have 3 1/2 years to go to finish paying off that freshman spending spree."
Susswein thinks there should be some relationship between what students can pay and the credit limit made available. In other words, no $1,500 limits for kids without jobs. Card issuers say that student users have good payment records, but there's no data on how many parents pay off the bills.
Card applications have been invading the mailboxes of high-schoolers, too. Robert McKinley, president of the credit-card data service RAM Research, says he knows of whole classes of high school students in certain ZIP codes who have received solicitations.
Although you have to be 18 to get a Discover card, the company promotes its name to youngsters through a variety of "youth initiatives." For example, sixth-graders are targeted for membership in its Michael Jordan
Foundation Education Club, which urges students to set and meet goals for themselves.
Sensitive to the publicity given to students heavily in debt, card issuers are producing more educational material.
Discover's September student mailings were expected to include a pamphlet on "the smart use of credit cards."
MasterCard distributes a money-management guide during freshman orientation.
Visa's clever pamphlet, "Credit Cards: An Owner's Manual," will be distributed to half a million college students this month. You can get one free by calling (800) VISA-511.
AT&T's Universal card, which just entered the college market last year, is going the extra mile. The cards come with explanations about how credit works. Students also get a warning flier if they reach 85 percent of their credit limit.
McKinley thinks young students are better off with secured Visa and MasterCards. Secured cards require users to deposit, say, $300 or $500 into a savings account -- and the card's credit line will generally not exceed the deposit. It's hard to get into trouble that way.
Jane Bryant Quinn is a syndicated columnist. Write to her at: Newsweek, 444 Madison Ave., 18th Floor, New York, N.Y., 10022.