Newspaper article St Louis Post-Dispatch (MO)

Students: Beware Credit Pitfalls

Newspaper article St Louis Post-Dispatch (MO)

Students: Beware Credit Pitfalls

Article excerpt

Back to school, for the modern student, means back to charging up a storm on credit cards. More than half the 9 million full-time college undergraduates have cards today, Visa reports. They're issued even to students who have no credit history and little income.

Many students use their cards responsibly. Assuming you're not a serial shopper, it pays to get a card when you're in school. You'll never again be accepted for credit on such easy terms.

But some students go so far into debt at so early an age that they ruin their credit history even before they graduate. For students with no income, credit limits should stay low. But many issuers seem to count on the parent to stand behind the student's bills - even though the parent doesn't co-sign the application and may not even know the card exists.

Amy Eskind, a reporter for this column, posed as a student to sample an on-campus charge-card sell at Vanderbilt University in Nashville, Tenn. She asked the representative for American Express what she should list as her annual income on the application. The rep told her to count not only her income from part-time jobs but also the value of her room, board, tuition and any allowance she got from her parents - suggesting $25,000 to $30,000 in all.

This effectively finds her creditworthy by drawing on her parents' income. American Express spokesman Bill Moss says a student's "income" does indeed include all sources of support, including money from parents. He adds that American Express doesn't assume the parents will pay. But that sounds pretty disingenuous, when parental support is part of the credit-granting process. Some issuers ask flat-out for the parent's income.

Michele Bedell, a former Radford (Va.) University student who testified last March at a congressional hearing, told of signing up for Visa and Discover cards, each with $500 credit limits. Before long, her limits went to $1,000. Her spending rose, too, until she could no longer make minimum payments. …

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