Credit Risk or Credit Worthy?
Published May 15, 2014
- Despite Widespread Access to Credit Cards, Use is Responsible
- "Non-traditional" & Grad Students Show Potential Problems
- Questions About Marketing/Use of Cards On Campus Remain
Washington, D.C., June 24, 1998—A new national survey of credit card use by college students reveals surprising but good news: while credit cards on campus are pervasive—two-thirds have at least one credit card, and 20% of those have four or more—their use is largely under control and responsibly managed, the study shows.
Most students—59%—report paying their monthly balances in full and on time, and student balances are relatively low, with 82% saying they maintain a balance of $1,000 or less. Almost all—86%—say they pay their bills on their own. Top reasons for using credit cards also seem prudent, as about half (52%) say it's important to use them primarily "to build a credit history" and/or for "emergency purposes” only (45%).
These findings challenge the widespread notion of credit card misuse and debt among college students, especially with increasing access to these cards and opportunities to use them for tuition and other education expenses.
The survey, "Credit Risk or Credit Worthy? College Students and Credit Cards," was conducted by the Washington, D.C.-based Institute for Higher Education Policy and The Education Resources Institute (TERI), in Boston. A total of 750 students were surveyed, drawn from a national listing of two million.
But the survey also reveals warning signs and patterns of potential misuse of credit cards among a significant minority of students. Of the nearly 20% of students who average over $1,000 in credit card balances, half have four or more credit cards and only 18% pay off their balances in full. These students also report different priorities for using credit cards: "because they are convenient" and to "stretch buying power."
The study's warning signs include: having four or more credit cards; having a balance of more than $1,000; carrying over monthly balances; and charging tuition and fees. Students who exhibit a number of these patterns include non-traditional undergraduate students (generally older, part-time, often married), and graduate and professional students. Early access to cards is another issue, as 55% of students received their first card during the first year of college, while 25% received their first card in high school.
The study also raises questions about how credit cards are marketed on campus, the offering of college "affinity" credit cards, and the recent acceptance of credit cards as payment for tuition and fees. More than half of students said their schools allow credit card payment for tuition and fees. But only one in five said they have done so, and of those that did, most (59%) paid their bills right away, avoiding high interest charges.
"This survey challenges common perceptions about college students and credit cards, but also offers important cautions about student credit card use," said Jamie Merisotis, President of The Institute for Higher Education Policy. "Students face universal access to credit cards with skyrocketing education costs," Merisotis added, "yet most are using credit cards responsibly and for the right reasons."
"We hear a lot about the problems facing today's college students, but not enough about their successes," stated Ted Freeman, President of The Education Resources Institute (TERI). "If we can find ways to build on this responsible student behavior after college," he added, "the country will benefit enormously."
The telephone survey, conducted in March and April of 1998, had a margin of error of +/- 3.5%. The Institute for Higher Education Policy is a non-profit education research group based in Washington, D.C. TERI is a Boston-based, not-for-profit organization providing education information and financing services.
