Study: College students lack financial literacy
Despite the efforts of the federal government to reduce the availability of credit cards to college students, credit card use has skyrocketed among young people in Gainesville and across the state and country. And according to a recent study, members of this demographic are severely lacking in knowledge about credit cards and the impact of credit card debt on their financial future.
In 2004, the average college student had just under $950 in credit card debt, according to the study. By 2009, that number skyrocketed to more than $4,000. In 2009, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act was passed, making it more difficult for credit card companies to distribute to target college students. However, the damage may already have been done.
That jump in credit card debt was accompanied by a significant decrease in financial literacy. The study found that, of the 70 percent of college students that have credit cards, about 85 percent do not know their cards’ interest rates. Further, 75 percent do not know their late fee amounts, and 70 percent don’t know their over-balance-limit fees.
As a result, more than 90 percent of college students with credit cards carry credit card debt from month-to-month. Only about 9 percent pay off their credit card debt in full every month.
The lack of informed knowledge about credit cards is likely to significantly burden students post-graduation. “In American, credit card on campus have been a disaster, leaving students buried in debt before graduation,” said the authors of the study, “often with little hope of paying off the debt before high fees and interest double the amount.” Couple that with the ever-growing student debt load faced by college students and recent graduates, and it seems that financial disaster may be imminent for many.
Source: Fox Business, “Survey: Students Fail the Credit Card Test,” Martin Merzer, April 16, 2012