College students' advice: Resist credit's siren song

Poll: Fewer undergrads opening accounts despite constant offers

By MICHELLE HATFIELD
mhatfield@modbee.com

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It's a population ripe for the picking — thousands of cash-strapped students who need to spend money on books, tuition, school supplies and food.

College is the time when most people sign up for their first credit card — that alluring piece of plastic that seems to offer limitless opportunity.

Financial counselors encourage students to get at least one credit card to build the credit history they'll need to rent an apartment or purchase a car. But it can be a bad move for anyone who hasn't mastered Money Management 101.

The lure is strong and hard to resist, especially if parents are in the dark. Card companies have perfected the art of setting up camp on campus — propping up tables in quads and offering free T-shirts, Frisbees, key chains, hats and raffle tickets for vacations to students who sign up.

Companies do offer special rates for college students and money-back programs on gas, textbook, tuition and school supply purchases.

But despite the constant onslaught of "preapproved" card offers delivered to mailboxes, fewer students are opening accounts.

A little more than 60 percent of undergraduates in 2004 had cards, down from 83 percent in 2001, according to the most recent poll by Nellie Mae, a loan company associated with Sallie Mae, the nation's largest student loan provider.

Modesto Junior College's Blanca Blanco, 20, said she has one card she's using to establish her credit history.

"I got it when I was 19 and I use it to pay gas and food," said Blanco, who's planning on a career in sociology.

Blanco's interest rate is 19.24percent on her balance of about $500. She pays more than her minimum payment each month — she sends in about $60 to $70, she said.

While Blanco eases into her credit card usage, Jesse Diaz's credit is recovering from a past charging addiction.

The 38-year-old father of two hasn't signed up for cards or opened a checking account since the incident.

"I deal in all cash," he said. "It's one way I keep myself straight."

One summer many years ago, Diaz said, he charged $12,000 worth of items on three cards, purchasing clothes and gifts for his family.

"I couldn't even think about paying it back. It can be a trap," the MJC nursing student said.

The students argue that it's not that cards are bad, it's just that people don't know how to use them correctly. They recognize some maturing needs to happen on their part before they sign up.

Brenda Ramirez, 20, has a Macy's account, but doesn't want to take out a card that can be used anywhere.

"It's tempting. I'm a lot more conservative. If you don't have it in the bank, you don't have it," said Ramirez, who's a psychol-ogy junior at the University of California at Merced. "I know myself. I know I won't have control over it."

Ramirez tries to pay twice the monthly minimum payment on her Macy's account. Her balance is a little more than $230, with a minimum payment of about $10 a month. She said she uses the card sparingly for makeup and clothing.

Communications student Naomi Adams' credit card bill goes to her parents. Appropriate uses were detailed to Adams — gas and other charges such as clothing were agreed upon before the card hit the register, she said.

Adams, who is transferring this fall from California State University, Stanislaus, to CSU Fresno, has no plans to take out her own card.

"I'm more terrified of the idea that I'll go on a shopping spree, and the interest alone would terrify me," said Adams, 20. "Not until I have a solid job and I have enough money to pay for (a bill)."