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Credit cards are profitable, but it comes at your expense
A lot has changed in the last twenty years or so when it comes to finances. Years ago, it was nearly unknown for a college student to have a major credit card. Having one required a credit history, and few students had one. As such, few college students had financial problems upon graduation. Today, that’s a different story, and most students have at least some credit card debt when they graduate. In fact, the average student debt is $3000. How did that happen?
Credit card companies discovered that the earlier they put their product into the hands of consumers, the sooner those consumers would incur debt and start paying interest. The business is profitable; the average interest rate is 15%, with some as high as 30%. Since few consumers pay their debts in full each month, that interest is guaranteed income, and it often can be assured for decades.
Credit card companies often set up on college campuses and offer free gifts to students just for signing up. They may offer T-shirts or any one of a number of other free gifts just to have the student sign an application. The student gets a shirt, and the company gets a debtor, perhaps for life.
Students need to realize that the cards offered, while convenient, do not offer favorable terms. The companies know that they are offering their product to people with little or no credit history, so the terms are not going to be good ones.
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