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Don’t Drink, Don’t Smoke, What D’Ya Do? - Charge It

March 14, 1994

WASHINGTON (AP) _ When Connie Bedell of Springfield, Va., sent her twin daughters to college, she offered them the standard advice: Don’t drink, don’t stay out too late and buckle up. In retrospect, she wishes she had offered one more admonition: No credit cards.

The daughters, Michele and Diana, now seniors at Radford College in Virginia, both got into debt trouble after obtaining credit cards as sophomores.

Neither had a job or a regular income beyond what their parents provided. They did not need their parents’ co-signatures to obtain their Visa and Discover cards. Yet when both daughters fell behind, their creditors turned to their parents to repay the more than $4,000 they owed.

According to Rep. Joseph P. Kennedy II, D-Mass., college students and credit cards are becoming an increasingly bad mix thanks to the card companies’ aggressive marketing campaigns and easy standards for granting cards.

″Why in God’s name would they say students don’t need a job or a co- signer?″ asked Kennedy, whose district includes Harvard, MIT and other major universities.

″There’s an underlying presumption the parents are on the hook,″ he answered.

Credit card companies say they make extensive efforts to educate younger card users and that students seem to handle them at least as well as older adults.

″College students are some of the most responsible credit users in the market today,″ said Susan Murdy, a vice president at Visa U.S.A. Inc. ″College students pay their balance in full more than half the time, and when they do carry a balance, the amount is about one-third that of the average for other consumers.″

Gary Flood, senior vice president for MasterCard International Inc., said his company’s educational campaign includes free videos and teacher’s guides on sound financial practices.

Bedell and her daughters told their stories recently to the House Banking consumer subcommittee, which Kennedy chairs.

Like hundreds of other parents, she is facing a choice: Pay off debts she didn’t know were accruing or see her children’s credit rating ruined for the crucial seven years following graduation when they are buying their first cars, renting apartments and, perhaps, buying their first homes.

″I’m going to have to pay these bills over my own. It’s going to be hard. All of our savings for tuition are gone,″ said Bedell, whose fourth child plans to enter college this fall.

Ruth Susswein, executive director of Bankcard Holders of America, a consumer advocacy group, said an estimated 61 percent of the nation’s eight million college students have at least one credit card. And card issuers are pushing aggressively, with giveaways and promotions, to sign up even more.

″Students are one of the very few untapped markets left,″ she said. ″Some of the largest issuers ... are now targeting college-bound high school seniors. ... However, too many students have no idea what they’re getting into.″

Most don’t understand they lose the 25-day, interest-free grace period unless they pay off their accounts in full every month and most don’t know that by paying the minimum balance each month it will take twice as long to pay off their debt as it did to earn their diploma, she said.

Ken McEldowney, executive director of the San Francisco-based Consumer Action, said the 1,600 community credit counseling agencies his group works with report ″a marked increase in the number of young clients ... who have large debts.″

″A common statement we hear is that the bank must be making a mistake, because, ’I make the minimum payment each month but the balance I owe hardly goes down,‴ he said.

Michelle Lopopolo, a lab technician in Worcester, Mass., and a 1992 graduate of Emmanuel College in Boston, said she resented the implication that young adults can’t be trusted to be financially responsible.

″Just look at the newspapers and see how many foreclosures there are on houses. Are you going to say we shouldn’t be giving out loans to 40-year- olds?″ she asked.

Rep. Carolyn B. Maloney, D-N.Y., has suggested that minors might be denied cards unless their parent co-signs.

Kennedy said a less Draconian way of tackling the problem may be requiring lenders to grant students no more credit than they can repay with their own incomes.

Connie Bedell offers her own solution: ″Along with the instructions, ‘Don’t talk to strangers’ add, ’Don’t take a credit card.‴