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Credit Card Blues

Credit cards can be a double-edged sword. On the one hand, they allow for a quick and easy way to build a credit rating for major purchases later in life. At the same time, they also present the potential to get deep in debt. With university representing one of the first opportunities for many students to receive credit cards, are they being targeted unfairly by banks?

We’ve all seen the booths set up on campus — banks and credit card companies hawking their products to students. Or the piles of mail offering credit cards with low interest rates for first-time applicants. Whatever the delivery mechanism, it’s hard to argue students aren’t targeted by financial companies as potential credit card holders.

With that being said, such targeting isn’t negative. A student who signs up with a specific bank is likely to continue banking with that institution for the rest of their lives — as cynical as it sounds, “getting them when they’re young” may not be a bad strategy.

But having a credit card isn’t a bad thing. It’s when the owner doesn’t possess the necessary financial literacy skills that dangers crop up, which will have dire consequences later down the road. Credit ratings take a long time to build up, and are easily ruined by careless spending. This can even apply to co-signers of credit cards, including parents.

Luckily in Canada, there are strict regulations in place that legally require banks to fully disclose all information on credit cards, including interest rates and annual fees. But such information is only helpful if consumers choose to make use of it. Failing to ask questions may create confusion later on.

Further problems arise when students don’t understand the concept of a “credit” card. If a student isn’t working, then paying off the balance may prove to be difficult. But unfortunately, it’s all too easy to look upon a credit card as a source of income. In an environment where students don’t want to be “left behind” when they see their peers who seemingly have limitless disposable income, credit cards offer an easy out for “keeping up with the Jones’.” This can lead to poor purchasing choices such as new clothing instead of food.

Another issue can arise if credit cards are associated with a certain kind of use. Students who get in the habit of putting their bar tab on a Visa or MasterCard run the risk of associating credit card use with having a good time and in doing so risk not seeing the potential problems they may run into.

Students are already a vulnerable demographic for credit card overuse. With food, tuition payments, rent, textbooks and other purchases, students often need money management skills they may not be prepared for. While it would be great for parents to teach some financial literacy skills to their kids, it’s ultimately up to the card holder to inform themselves of both the benefits and risks of owning a credit card.

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