Sunday, May 27, 2007

Who's educating kids about credit cards?

Once again, we see why we should have mandatory financial education in this article from CBS about "Generation Plastic", college students fresh from graduation with mountains of not just student loan debt, but credit card debt.

I didn't understand interest and what a high APR was — I really just didn't understand the concept, and it seemed like a good idea — like (I) can't afford it now, but I will pay it off later

These college students are flooded with offers. They get them in the mail, the universities happily let them set up booths on campus, and they get phone calls. It's the same brand loyalty marketing that we see with other products. Children's games feature VISA cards (monopoly now uses 'debit', yet I doubt the new monopoly teaches what happens when you overdraft your checking account). The toys advertise credit cards. Is this surprising? Companies are advertising to children younger and younger, with more kids being exposed to subliminal ads and product placement than ever before (teletubbies, anyone?).

How many of these kids are getting an education to defend themselves against the onslaught of corporate greed?

I would say in a classroom of 20, maybe 1 or 2 of them

Without classes in schools teaching kids about this stuff, they rely on their parents. But their parents aren't giving them this critical information. What defense do teenagers have entering college against companies that offer them free stuff just for signing up for a 'credit card', then all they know is that "Hey, Barbie loved her credit card, I need one too!". Are these kids asking what the card terms are?

Of course not.

I didn't understand interest and what a high APR was — I really just didn't understand the concept

1 comment:

Jim said...

I signed up for some credit cards in college and got a t-shirt. Never actually used these stupid cards either, I already had one I used. After the fact of signing up for them I got their rates, most of which were over 16% which was high at the time, I had a lower APR card I paid in full already. It wasn't until I hit the point where I was using the credit card to pay for books and could not pay that balance off. So I went from deadbeat to revolver and cranked up a balance. I eventually stopped paying for school with a credit card and got student loans instead, which made it easier on me to say the least. Now I'm still at it today getting those cards paid off at a more accelerated rate to get rid of the debt that hangs over my head from school.

I was trying to establish my credit and ended up in debt. Student loans from the start would have been a better way to go. Live and learn I guess, but now that I know I try to make sure it doesn't happen to others. I support having all students go through a personal finance class to at least understand how this stuff works.