Burning Through Assets

As an 18-year-old setting foot on campus of Fullerton College for the first time, I remember credit card offers being thrown at me left and right. Everywhere I went someone was trying to entice me to get 'their' card with a free sports bottle, towel or t-shirt. Not having one at the time, the thought of having a credit card and being an adult was exciting. I could buy anything I wanted on credit. Little did I, or does any other college student know the consequences it can bring.

The easiest thing to do in college isn't making friends, and learning new things as one might think. The easiest thing to do is to acquire credit cards and pile up balances.

"The average college student receives eight credit card offers the first week of school," said Sally Antwiler, Director of Education for Consumer Credit Counseling of Orange County.

If you aren't careful and trained on how to use credit cards responsibly, you could rack up debt. You may buy things you have had your eye on, but knew you couldn't afford. This can start a downward spiral into excessive credit card debt. Opening card after card to pay for things you used to be able to afford, but can't now that you have so many bills coming in each month.

"It is better to have one credit card because you can see how much you owe. When you are in college, it is okay to have one card to get by, especially if you go away to school. You should have one credit card and learn how to use it responsibly," said Barry Harsaran of Christian Credit Counseling.

According to a survey by PSI global, "The generation X, which is people aged 22-33 account for only 18 percent of American credit card holders, but they contribute 25 percent to its outstanding credit card debt."

According to Robert Manning, the author of Credit Card Nation: The Consequences Of America's Addiction to Credit, "There has been a huge increase in unsecured credit card debt: from $292 billion in 1992 to $654 billion at the end of 2000."

We use credit cards differently than we used to. What used to be seen as a convenience is now seen as a way to pay for items we can't afford. People used to charge what they knew they could pay for. Today, they charge what they want and worry about paying for it later. More often than not, later isn't for a long time.

Sally Antwiler educates over 40 high schools and colleges a year to teach them how to balance a budget. "It is a good idea for students to hear the message. We aren't telling them that credit cards are evil. We just want them to be aware that you can get into trouble if you aren't careful," she said.

The student of today uses the credit card to live on. Years ago, a student with no money, would scrounge up their change, go to the store, buy Top Ramen for $1 and live off it for a week. Today, a student goes to the store, fills up their grocery cart and pays for it on credit. Times have changed. If you buy a $10 pizza with your credit card and you don't pay it off for months, with all the finance charges your $10 pizza is now $80.

"Most only pay minimum payments, which means they will be paying the debt back for the next 70 years. They are not budgeting themselves. They overestimate their income. They are living in the future," said Antwiler.

Over 40 percent of students graduate with credit card debt. The average debt for college students is about $3000. Many students drop out of school due to credit card debt to work full time. At 18, legally an adult, you are bound to legal contract including credit cards, school loans, car payments, car insurance and rent. Without credit cards life is affordable.

"It is a profit generating system. The U.S government promises that you will pay it back. It is a business," Antwiler said.

"It's an ugly world. The credit card companies are thieves," said commercial collection attorney John Gardner.

It's a difficult time to be a young adult. If you try to keep up with the trends of society you will go broke. The world can be very competitive. "We live in a capitalist country and having material things is important to us," Harsaran said.

When is it time to stop the cycle and face the fact that there is a problem? An old saying comes to mind; 'Borrowing from Peter to pay Paul'. When you borrow from one creditor to pay another one, you are living beyond your means. Buying a new wardrobe, computer, etc, all on credit knowing you won't be able to pay for it working your minimum wage job at the mall. You are drowning in a sea of credit cards, and no one is throwing you a life preserver.

With so many debt consolidators and credit counselors, how do you determine which ones will help you get out of debt and which ones will scam you out of what little money you have? According to the National Foundation for Credit Counseling (NFCC), make sure that the organization is accredited. The NFCC sets the standard for credit counseling, debt reduction services and education. NFCC members are known as Consumer Credit Counseling Service (CCCS).

Consumer Credit Counseling has been around since 1966. There are offices in Orange County including Santa Ana, Anaheim, Brea, Costa Mesa, Huntington Beach, and Mission Viejo. They are non-profit, members of the NFCC, and also members of the Better Business Bureau. You make one payment each month. CCCS distributes it to your creditors. CCCS helps you pay your bills and helps the creditors get their money. CCCS offers courses on re-establishing credit, and money management. "Eleven percent of the customers consumer credit counseling services sees are younger than 24," said Sara Allen, director of CCCS.

The Fair Debt Practices Act also may apply to you. The Fair Debt Practices Act protects consumers of abusive practices by debt collectors. A debt collector can't harass, oppress or abuse anyone in connection with the collection of a debt. "The recent decade of economic growth and failing unemployment has featured a perplexing phenomenon: personal bankruptcy rates in the late 1990's soared to nearly 10 times the rate of the Great Depression," said Manning.

The target audiences for bankruptcy are students under 25. The new bankruptcy laws have made it tougher to get out of debt. The credit card companies got to the government so people couldn't walk away from the debt anymore," said Gardner. With a chapter 7, if there's anything you can pay, you will pay that amount each month for 5 years. Chapter 13 requires you to be responsible for paying back the entire debt.

Not paying, paying late, maxing out your credit cards, transferring balances, opening new cards and filing bankruptcy will all reflect on your credit report. Those World Series tickets you bought when you were 21, could still be affecting your life when you are 31, and you could still be paying for them.

Your credit can affect your chances of getting a new job. You may never know why you didn't get that job, when you know you nailed the interview. Employer's check credit to see if the potential employee is responsible and has integrity. "30 percent of employers check credit. It has to do with honesty. If you are far in debt, you may get so desperate that you steal from them. Employers want to be able to trust you," Antwiler said.

"The best advice I can give students is don't accept credit cards. It is an addictive behavior quality. If you are irresponsible with buying things that you can't pay for then don't get a credit card. You need to spend less than you make, not more," said Gardner

As a college student working full-time, I've a hard time understanding why most of my peers don't work. I don't see the benefit of buying whatever you want and handing the bill to mom and dad. Those who have parents paying the bill are living in an unreal world. Mom and dad pick up the tab, so you think you are living within your means, but in reality mom and dad are.

"The best way to get the bad marks off your credit is to pay your bills. Over time you will become responsible and want to clear your credit. The best way is to pay the debt," said Gardner

As easy and fun as it was to get into debt, it takes hard work, and responsibility to get out from under it. Having bad credit is no joke; it is a serious matter that will follow you. It can affect your life in so many ways, be it employment, interest rates, living environment etc. It can be embarrassing and hard to deal with. It's preventable and a trap you can avoid.