Beware of credit card dangers

Credit card debt will destroy our generation ““ yet we’re welcoming it with open arms.

Maine Senate Democrat John Nutting blames the credit card companies for our financial insecurity. Early this month he introduced “An Act to Protect Young Consumers,” which would require people under the age of 21 to obtain permission from a parent or guardian to apply for a credit card. Currently, one can apply for a credit card at 18.

If the bill becomes a law, it will only make parents more liable for their child’s financial troubles and create hardships for young adults who are financially independent of their parents. We need to know how to build good credit before applying for our first credit cards.

This bill may only delay the financial pitfall we are bound to face as college students. Once you hit the age of 21, you will still not have the knowledge to have a healthy financial life. The credit card woes of the U.S. population over age 21 still exist, and unfortunately, Nutting hasn’t thought of a national remedy for that.

A recent MSNBC article says that according to Nellie Mae, a student loan company, 76 percent of undergraduate students had one or more credit cards with an average outstanding balance of $2,169 at the beginning of the 2004 school year.

Many students have found it easier to juggle credit cards than to balance their checkbooks. Our debt is a result of both the credit card companies handing us credit cards on silver platters and the fact that we ignore the 20 percent interest rates and grab at this “free money.”

Credit card companies do not want to alleviate your debt or reward you for paying the full balance each month. They capitalize on you only paying the minimum payment each month, hence the high interest rates. We can’t depend on credit cards to help manage our finances.

Thus, if we don’t learn financial self-reliance now, if we don’t educate ourselves now, we will suffer even more down the line.

And the wise, but in some cases slightly hypocritical, words of our parents about money management don’t seem to stick.

So we’ll have to learn the hard way, like Andy Bussell, a senior from California State University, Fullerton.

Last week, the Los Angeles Times did a feature story on Bussell, who is recovering from a credit card debt of $10,000. He has been living out of his truck for 19 months to save money to pay off his credit cards. His homelessness was a choice.

Bussell deserves praise for taking such drastic measures to escape his black hole of debt. Yet his tale is one of desperation. He sacrificed a home and other amenities that we consider necessities because he was so determined to erase his debt. To make the decision to put yourself on the street is heartbreaking.

Credit cards can help build credit. And good credit, in our financially uninformed minds, comes from spending. Not really. Good credit comes from paying. And if we don’t learn to pay now, we’re screwed later.

Being in school, with thousands of dollars of educational loans, most students have the view of “spend now, pay later” since, in essence, we are doing the same with our tuition.

But this is not a healthy way to look at money ““ to think that tomorrow, we’ll be raking in the dough, so we can spend what we want today and not worry about tomorrow.

But what if we don’t get that great job right out of school? What if other expenses come up, and what if our parents decide enough is enough? What will we do then?

We won’t be able to do much, so we need to change our spending habits now.

We need to educate ourselves on building good credit and managing money instead of just signing up for another card.

We need to realize that if we don’t have the cash, we can’t afford it.

Send your credit card bills to abissell@media.ucla.edu. Send general comments to viewpoint@media.ucla.edu.

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