Build credit or build debt?

Aug 282002
Authors: Monique Lewis

The average American has a credit card debt of over $8,000, according to the Consumer Credit Counseling Service. The average person has 11 open credit lines. CSU students are bombarded with credit card applications all the time, but having too many could affect your credit rating.

Asia Mays, junior, political science major owns five credit cards: Sears, JC Penny’s, Express, Foley’s and Victoria’s Secret.

“I was just denied a credit card at American Eagle,” Mays said. “The more credit cards you have, the worse it gets because they check how many credit cards you have. It doesn’t matter if you pay them on time. That docks against your credit card report. Get one major credit card with a low initial annual percentage rate.”

Creditors from US Bank have a different opinion.

“A lot of people get credit cards to build credit,” said Aaron Jeffrey, banker for US Bank. “Why not use somebody else’s money to capitalize it? That’s the beauty of it; it’s a valuable tool.”

Jeffrey further explained the dilemma students could face if no credit was established during college. If students want to buy a home or vehicle without any credit established before graduation day, those possessions will be difficult to buy. Then they will have to deal with the option of cosigning.

“It’s up to that student and how responsible they are to pay their bills on time,” Jeffrey said. “It’s not that you have a credit card. You can’t do anything without credit established. It’s a stepping-stone. A lot of people who are multi-millionaires did it with credit cards, by using somebody else’s money.”

“You have to have credit,” added Dan Jones, banker for US Bank. “They can easily be abused, looked at as free money. If you use your credit card and pay it back, it’s a good product. If you don’t manage it, then it gets out of control, you get way into debt, then have to find a way out. You get yourself into debt (not the credit card).”

US Bank sits down with customers to educate them about how to manage their money and do financial profiles.

Jenna Hall, a sophomore English major, said, “I didn’t really want to deal with paying them off every month. It’s a potential bad credit record. My older sister missed a payment and she has bad credit now.”

Some students believe that Student Financial Services is the resource of help when they find themselves in debt. That is not necessarily true.

“We’re not able to financially offer loans to pay off credit cards,” said Jim Harris, associate director for Student Financial Services.

Harris said the trap with credit cards is that after one month, the low interest rate the student receives when they get a free T-shirt increases. Harris has seen more and more students graduate with credit card debt.

“I think some students use credit cards for the right reasons,” Harris said.

While the office is currently pursuing a program to help students who find themselves in debt, students are referred to the Fort Collins Consumer Credit Counseling Service.

“Credit card debt has been a growing problem among students,” said Sara Allen, the executive director of the Consumer Credit Counseling Service. The counseling office provides a variety of help to students such as helping students with a budget (financial counseling), set up a debt management program to make payments to creditors, and do some goal-setting work.

“We live in a world that says, we need it today,” Allen said. “It’s real easy to put things on a credit card. We’re encouraged to use credit. Sometimes we get encouraged to just spend money and worry about it later. We often see students with small balances and a lot of credit cards.”

You can contact the Consumer Credit Counseling Service, at (970) 229-0695. The office is located at 126 W. Harvard St. #5. Walk-in counseling is on Wednesdays.

Here are some safety tips to save you from stressful credit card debt:

1. Use no more than one credit card.

2. Stay away from department store credit cards.

3. Use credit cards for emergencies or plane tickets

4. Keep a savings account so that the credit card will not be the first option

during emergencies.

5. Be willing to cut corners. Nike tennis shoes or schoolbooks?

6. Save more and spend less.

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