Charging Ahead

You're eating dinner at a fancy restaurant with friends. Or perhaps you're doing a little shopping at the mall. Either way, you take one look at the bill and your jaw drops -- you don't have enough cash. 
But wait, you've got your credit card. 
The lure of widely available money in a nation where people always want more can lead to big problems, says Dr. James Roberts, Baylor associate professor of marketing and the W.A. Mays Professor of Entrepreneurship. And it's bait that increasingly is attracting students, he says, both in college and high school. 
"If you go back 20 years, you didn't get a credit card until you had a full-time job. You had to be out of college and employed," says Dr. Roberts, who has been researching materialism, compulsive buying and credit card use for about seven years. In the late '80s, an increasingly competitive market among credit card companies caused issuers to begin looking for new customers; students were an untapped market who had the potential to become lifelong consumers, he says. 
"It has become a real problem for younger people. They grew up in a 'plastic society,' where credit cards were available and used without any kind of reservation. Now, we're seeing the negative outcomes of that," Dr. Roberts says.
According to statistics from a 2001 survey conducted by the Nellie Mae Foundation, a higher education loan provider, 83 percent of all undergraduate students have at least one credit card, the average balance of which is $2,327. Additionally, 21 percent of undergraduates who have cards carry balances that are between $3,000 and $7,000. 
"Pretty soon, it's not hard to imagine a bill getting up to the point they can't make the minimum payment," Dr. Roberts says. "If they've built up a big enough balance, companies will push them toward bankruptcy."
Even if students don't dig themselves into that deep of a hole, there are other pitfalls that accompany irresponsible credit card use, he says. College students may have to work longer hours in order to pay off their balances, which means they spend less time studying. Some students drop out, Dr. Roberts says, and those who do successfully graduate with a degree aren't always free from bad credit ratings. 
"One way or another, you end up paying for your past transgressions," he says. Potential employers, landlords and mortgage companies all track financial records, which can cost applicants jobs, apartments or homes. 
Despite the obvious dangers, not all credit card use is bad. If used wisely, cards can help students learn about budgeting while building good credit, Dr. Roberts says. Parents and educators need to teach young people how to use credit cards responsibly, though, he says. "Students need to be aware of the cost of using credit."