By now many college students are back on campus, if not in classthen settling into their dorm rooms and getting ready. Among theirbooks, bed sheets, new clothes and other necessities will be quiteoften a credit card. Sometimes with the parents name on it, sometimesjust the students own.
Nearly 75% of all sophomores, juniors and seniors have maxed out atleast one credit card. Nellie Mae's survey in 2000 showed 23% of allfreshmen and 92% of all sophomores had at least one card in theirpocket.
I don't need to lecture you on the danger of giving a credit card toa college student who is working part time and going to school fulltime. The average student will earn a bachelors degree with $30,000in student loan debt and nearly $3,000 in credit card debt. Not good.I recommend a debit card for the simple reason that when used, youare only using money you already have. When you swipe the card acrossthe terminal at the store, the information is transmitted to yourbank which then takes the money out of your account. Ta-da, no debt.Of course if you have automatic overdraft protection this feature isworthless. AOP extends you a loan instead of bouncing the check ordebit card transaction.
A big drawback is the lack of theft protection. If the card isstolen, you have two days to report it, or else you are liable for$50 of unauthorized charges. This jumps to $500 if you don't discoverthe theft. If you wait over 60 days, forget getting your money back.To boost use of their cards, Visa and MasterCard are promising thatthey won't hold users liable for unauthorized usage. These cardscarry the appropriate company logo and don't require a PIN number forusage. You sign a receipt just like a credit card, only the moneywill be removed from your account in a day or two.
I could go into detail about how a credit card works, and how youcan use a debit card for cash withdraw from ATM machines, but I don'tneed to.
The best method of paying for purchases by college students is stillcash. But for those who want the convenience of plastic, the debitcard is the next best thing. So if you gave your college student acredit card this year, take it away and replace it with a debit card.And then hold the student accountable for their purchases and go overtheir transaction record a couple times a semester.
Roger Sorensen
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