Frances C. Lawrence, Jennifer J. Burczyk-Brown, Rebecca C. Christofferson, Sheri R. Fair, E. Barry Moser and Jeanette A. Tucker
In recent years, credit card use has grown dramatically among college students. This increase in the number of students holding credit cards and incurring credit card debt has generated concern that these students are overextended and unaware of the long-term consequences associated with severe indebtedness. When other debt, such as educational loans, is added to this, the concern becomes even greater.
If used responsibly, credit cards can provide a number of advantages to college students. A credit card can be a convenient means of payment, a useful tool for learning financial responsibility, a resource in case of emergencies, a means to establishing a good credit history and a way to gain greater access to credit in the future. If credit cards are mismanaged or misused, however, the disadvantages can result in severe financial consequences. Credit cards may tempt students to live beyond their means. Furthermore, excessive debt and late payments can damage students’ credit ratings and make it more difficult for them to obtain credit down the road. In addition, students who are financially inexperienced may not understand the cumulative effect interest rates can have on the amount of debt they owe. Inadequate personal financial management skills are likely to place some students at greater financial risk for having large – and perhaps unmanageable – debt burdens when they graduate.
How are Louisiana State University undergraduates using credit cards? Are they managing credit card debt wisely? What can campus and community organizations do to offer the appropriate kinds of help to enable students to be financially literate? This article provides a detailed description of credit card use and financial practices of students at LSU. It also identifies resources and services universities and other organizations can offer to help students better manage their credit card debt and other finances.
An online survey including 41 questions was designed to investigate the prevalence and use of credit cards among LSU students. It was distributed through campus email accounts to 2,400 undergraduate students. Because of the sensitive nature of some of the survey questions, extra precautions were taken to make sure that none of the personal information would be connected with student names or email addresses. After a total of three emails requesting students’ assistance in completing the survey, 595 students responded for a 25 percent response rate.
Most of the students (70.9 percent) had at least one credit card. Slightly more than half (51.4 percent) acquired the card before college, and the likelihood that students had at least one credit card increased with each additional year in school (48.5 percent of freshmen who responded reported that they had at least one credit card; 86.1 percent of seniors had at least one). About three-fourths of the students used cards on a fairly regular basis (daily, weekly or monthly). Only a fifth rarely used their cards (see Figure 1). The most frequent expenses for which LSU students paid with their credit cards included clothes, automotive-related expenses (gas/repairs/maintenance), food and educational expenses (see Figure 2).
A large number of LSU students appear to use credit cards responsibly. About half of students (49 percent) reported paying their bill in full each month. Almost half of the LSU students with credit cards (48 percent) reported credit card balances less than $100. Most students (80.4 percent) reported that they were not “maxed out” on any of their credit cards.
However, some LSU students appear to be financially at risk for accumulating large amounts of debt and paying high amounts of interest. Particular concerns include:
- 51 percent of the students reported not paying their credit card balances in full, and 14 percent indicated they paid only the minimum.
- 30 percent had to use credit cards for things that they believed they should have been able to pay for with cash.
- 23 percent had more than $1,000 in credit card debt.
- 20 percent had one or more cards “maxed out.”
Included in the online survey were questions from the checklist used by the Consumer Credit Counseling Services (CCCS; see Table 1), which recommends that if an individual answers “yes” to three or more of the questions, he or she should “call Consumer Credit Counseling Service today!” A high percentage of those students having credit cards answered “yes” to three or more questions (30.4 percent with credit cards; 10.7 percent without credit cards). It should be noted, however, that three of the nine questions are only applicable to respondents who have credit cards.
While many students are managing their credit well, others appear to be at risk for financial hardship. Based on this research and findings from other studies, we identified the resources and services that can be offered to college students to help them better manage their finances and use credit responsibly. These recommendations are in no particular order of priority.
- Include a Web link on the university’s homepage to enable students to go to sites addressing the wise use of credit and the costs of unwise use.
- Offer an online course or program related to financial literacy.
- Require credit card vendors who come to campus to hand out materials on responsible credit card use along with credit card applications.
- Provide financial education instruction as part of freshman orientation for incoming students and their parents.
- Offer seminars/workshops on the subjects of money management and credit use to small groups of students during the year. Credit card-issuing institutions should be approached for funding support of these and other programs.
- Offer financial counseling services.
To address these issues, LSU AgCenter family resource management educators conduct financial education programs for college students during freshman orientation and student conferences and in collaboration with on-campus student organizations. Several Louisiana universities offer undergraduate courses addressing personal and family finances.
Frances C. Lawrence, Alumni Professor, and Jennifer J. Burczyk-Brown, Former Research Associate, School of Human Ecology, LSU AgCenter, Baton Rouge, La.; Rebecca C. Christofferson, Former Graduate Student, Department of Experimental Statistics, LSU AgCenter, Baton Rouge, La.; Sheri R. Fair, Extension Agent, LSU AgCenter, Gonzales, La., E. Barry Moser, Professor, Department of Experimental Statistics, LSU AgCenter, Baton Rouge, La.; Jeanette A. Tucker, Associate Professor, School of Human Ecology, LSU AgCenter, Baton Rouge, La.
(This article was published in the winter 2006 issue of Louisiana Agriculture.)