Why Do College Students Fall Into Credit Card Debt?

According to Sallie Mae, about 84 percent of college students owned at least one credit card in 2008--up from 76 percent in 2004. By the time the average student graduates from college, he will accumulate more than $3,000 in credit card debt (including those without a credit card). College students fall into credit card debt due to the relative ease of getting a card, the convenience of it, and sometimes, out of necessity.

Education

Only about 26 percent of teenagers understand that credit card companies make money by charging interest and charging late fees, according to Charles Schwab. In a 2009 Sallie Mae survey, 84 percent of college students felt they needed formal financial education classes--with 64 percent wishing they had received this type of education in high school.

Function

Credit cards can lull students into going over budget, according to CNN. Gaining a line of credit lets students believe that have money to spend on items, such as clothes and electronics, that they do not have. Additionally, college students are already strained financially due to the costs of college, so putting something on credit just seems like the only option.

Considerations

College tuition probably contributes to student credit card debt. The average credit card debt load for students has climbed along with the cost of college, according to USA Today. Also, private educational loans are becoming harder to get--part of the reason for a 134 percent increase in educational expense related credit card debt in 2008. According to Sallie Mae, at least 30 percent of students have to put some of their tuition on credit.

Potential

In 2010, a new credit card law--the Credit Card Accountability Responsibility and Disclosure Act (CARD Act)--put an end to credit card companies enticing students to apply for a credit card by giving away free pizzas and T-shirts, according to Smart Money. However, this just means credit card companies might start giving away promotional items to build brand loyalty or to get their parents to co-sign on a card.

Tip

Despite the new law, credit card companies, such as Discover, plan to continue marketing toward college-age individuals. Although signing up for a credit card early helps establish a longer credit history, you probably should avoid a credit card until you have better financial management skills, according to College Board. Alternatively, you simply could use a debit card to help prevent going over budget, or keep a credit card in case of an emergency.