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WEDNESDAY, DEC. 12, 2001
FROM THE COVER
THE UNIVERSITY DAILY KANSAN = 3A
Debt: Credit cards can change students' lives for the worse
CONTINUED FROM PAGE 1A
He said his employer tabulated the fraud at $920 and confronted him with an ultimatum.
"My boss offered me one of two options," the former KU student said. "One, he could press charges for credit card fraud. Two, I could pay him back, which I obviously did."
He didn't have cash to pay his employer and he didn't want to tell his parents what he had done, so he took out a cash advance from his Visa card to pay the fraud debt.
With that, Tabrizi was locked into a debt he couldn't pay off completely. Constant spending and high interest rates kept biting into his wallet.
"Up until this point, I had never had a balance on my credit card," Tabrizi said. "I had always paid them off at the end of the month.
"It's like jumping off a building and you need someone to catch you and that credit card is your safety net."
He said being in debt didn't stop him from spending more money with his credit card, even when he was between jobs. He ate out in restaurants, took in movies and bought groceries.
"There was no money coming in, but I was using my credit card like I had tons of money." Tabrizi raid
Baker, the credit counselor, has seen many students with credit card debt who don't want their parents to find out.
TRAPPED BY INTEREST
He said 20 percent of all clients he counseled were KU students.
Baker provides a debt payment scenario to his clients illustrating how easy it can be to get trapped by high interest credit card debt.
He said a student who had $1,000 worth of credit card debt and a 21% interest rate would have to pay $210 in interest for that year. If the student paid only the minimum monthly payment of $20 every month, the principal amount owed would be reduced by only $30 for the year. The student would have paid $240, but their debt would still be $970 because of high interest.
Baker said paying off that $1,000 debt with minimum payments would take nine years.
Problems to watch for when using credit cards
- Over the limit (OTL) fees.
- Late fees and when can
you be charged such fees.
you be charged such fees Membership fees and annual fees.
annual fees.
- Charges for credit card insurance (aka; credit protection fees).
- Transaction fees — cash advances charge an average of $15 per advance.
Source: Consumer Credit Conselling Service
Judy Lewis, a credit and debt consultant, said credit card companies preyed on college students who spent on impulse. She said providing inexperienced credit consumers with a tool enabling them to purchase without funds created a good chance they would fall behind and pay high interest rates.
Mary Corcoran sorts through her large wardrobe, containing clothes she purchased on credit. She seldom wears the clothes now.
"A credit card is a trap," Lewis said. "It's like a spider's web. Once you're in the web, its hard to get out."
She said when it came to using
credit, students didn't arrive at college prepared.
Mary Corcoran was one of those students who got a crash course in credit card responsibility.
She said she received six of her credit cards through solicitors on campus when she was a freshman.
She applied for the cards just to get free T-shirts, posters and sunglasses offered by solicitors.
"I really have no idea what possessed me," Corcoran said.
Based on her experience with credit cards, Corcoran said she would advise other students not to get one.
"A credit card is a trap. It's like a spider's web. Once you're in the web, it's hard to get out."
The petition received Student Senate's endorsement in November by a 35 to 20 vote.
"I'm in full support of not giving credit cards to someone my age." Corcoran said. SCRUTINIZING SOLICITATION
Mills said solicitors didn't act responsibly by hawking free merchandise to entice students to sign up for credit cards.
"What they don't tell students is that if they get rejected for the card, that affects their credit rating." Mills said.
Justin Mills wants to use his position as student body president to prevent students from being caught in a credit card trap. His solution is to ban credit card solicitors from campus.
Several universities have successfully banned credit card solicitors from campuses, including the University of California at Berkeley, Fort Hays State University and Louisiana Tech University. So far, the bans have been enforced without incident.
Eric Meyer, who solicited for American Express on Wescoe Beach in October, handed out "free" T-shirts to students in exchange for filling out an application.
Robert Baker runs Consumer Credit Counseling Service, 2518 Ridge Court. His business attracts debt-ridden students, who seek his counsel and assistance to salvage their finances.
He said he signed up about 40 students, but only after applicants were given information about how the credit cards work
Kelly Faulconer, Lawrence freshman, stopped by Meyer's table and filled out a credit card
Judy Lewis Credit and debt consultant
application. In return, she got a shirt reading "SEXSI" in the style of a Pepsi logo.
"I just did it for the T-shirt because they told me you could just cut the card up if you don't want it," Faulconer said.
She wasn't sure if she would activate the card. LIMITED EDUCATION
Many credit card companies say they provide information to customers about responsible credit card use.
Tom Scudder, Customer Support vice president for Five Star Bank in Colorado Springs, Col., said credit card companies made money primarily on interest rates and, to a lesser extent, on fees.
He said there were advantages to the proper use of credit cards, such as receiving rebates, airline miles and having the convenience of "buying now, paying later."
He said most students qualified for a credit card because, ironically, they didn't yet have an established credit rating that could disqualify them. Credit card companies don't have sole responsibility for educating students about how credit works, he said.
He wants to set up an organization on campus geared toward providing students with direction and education regarding credit.
"They really consider it the consumer's responsibility to educate themselves." Scudder said.
Robert Baker agreed that education was the best defense against credit card debt.
"I think a lot of students don't make an appointment because they are apprehensive," Baker
said. "It's important to empower students to make their money work for them, rather than against them."
BEATING THE SYSTEM
Katie Craig considers herself one student who spends responsibly and understands how credit cards work.
She said her MasterCard debt was $700 and that she usually paid at least the minimum every month, more if she had the cash.
Craig, Hutchinson junior, said she didn't overspend on either of her two credit cards.
"It's really easy to spend a lot," Craig said. "You just have to be careful."
Some students, such as Eman Tabrizi, try to avoid paying interest by playing the credit card version of musical chairs. He transfers a debt onto a new card that promised no interest on a balance for six to 12 months.
He said when the debt on his credit cards reached $2,000, he transferred it to an AT&T credit card to avoid the interest rates on his old card.
He said borrowing money from a credit card to pay another credit card debt put off dealing with his debts for a few more months.
BREAKING THE CYCLE
Tabrizi found out that spending money that he had not yet earned was a mistake that still costs him.
He regretted taking out the cash advance to get out of immediate trouble with his employer, but he was more disappointed with the reason he had to do so.
"It's put a lot of pressure on me to finish my degree," said Tabrizi, who is trying to complete his associate's degree at Johnson County Community College. "I feel the pressure of having to pay the bills."
"I'm not one of those people who thinks that credit cards are a curse," Tabrizi said.
Tabrizi said the only person he had to blame was himself.
Coronar has sworn off credit cards. She now lives at her father's house in Lawrence so
Undergraduates pile on credit cards and debt
Students are finding it easier to receive credit cards, causing their average debt to rise.
Students who have credit card debt
Students who have 4 or more cards
Average credit card debt
Source: Nellie Mae
she doesn't have to worry about paying rent and can focus on paying off her debt.
With his support, Corcoran is working toward a debt-free future. She said it would be four years before the debt would be paid off.
Her two remaining cards are maxed out and useless, just filling a place in her wallet. She cut up the other six and gave them to her dad as a Christmas present. He still has them in a dresser drawer and calls them the best present she ever gave him.
Melissa Carr/KANSAN
"I would be happy if it took ten years." Corcoran said. "I want more than anything to be out of debt."
<< for links to more information about
  credit card debt, visit
  www.kansan.com>>
— Edited by Michelle Ward and Kate McCarty
—Designed by Ann Erickson
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