Economy, federal laws cause decline in students using credit cards


Consumers are caught in the middle by the law that limits what banks can charge retailers for processing debit card purchases. Photo courtesy of Bob Andres, Atlanta Journal-Constitution/MCT.

Jimmy Miller

For some students, such as fifth-year senior Josh Patterson, an electronic media production major, credit card usage is a tricky concept to master.

About a year ago, Patterson saw a good bargain on What started off as spending $150 became a greater situation than Patterson imagined.

“I was given a large spending limit because, at the time, I had no debt whatsoever,” Patterson said. “I racked up $1,500 worth of debt on that credit card, $2,500 (of) debt on another and $1,000 on another card. About one-third of the debt came from Amazon. … I mostly spent it on electronics for books and school.

“It was a nasty situation,” he said. “By that point, I was already up to my eyeballs in debt. It created a very stressful situation where you come to a point where (you ask yourself), ‘Maybe I’ve made wrong decisions. What am I going to do to get out of it?’ ”

Patterson’s struggles serve as an example for this generation of college students. A survey conducted by Sallie Mae, a corporation that focuses on student loans, found fewer college students today are investing their money via credit cards.

According to the survey, 35 percent of students own credit cards — a decrease of 5 percent from last year and 7 percent from 2010.

Credit vs. debit

when using a debit card

While the number of college students that use credit cards is declining, the number of students using debit cards is rising. Sallie Mae, the organization that reported these changing numbers, reported that twice as many students own debit cards as compared to credit cards. But why? What is different between the two plastic cards? Here are some key differences:


  • Difficult to spend more than you have. While it is possible to overdraw from a banking account, it is difficult because debit cards take directly from an account. As long as the user keeps careful watch, it’s possible to set up the debit card to take no more than what’s in an account. The user must set it up this way in advance.
  • Debit cards spend money from a banking account, and credit cards work directly from a line of credit. This means debit cards are not used from loans, but rather from money that is actually in possession of the user.
  • How merchants use debit cards: A business will transfer money from the bank account to an account of their own. This process may even take a few days.


  • Debt is more likely to become a problem. Credit cards are loans made from the credit card company with an interest rate attached to the purchase. Essentially, this means that users will end up paying more for their purchase once the payment back to the loaning body is made.
  • Frequently used for larger purchases. Credit cards are often used for long-term investing purchases such as travel or renting a car.
  • Credit cards create credit scores. For better or for worse, credit cards form a person’s credit history. Credit history is an important factor companies look at when selling houses or cars.

The findings of this survey suggest students are more concerned about using a credit card than they have been in the past.

“During the recession, people of all ages shifted from using credit cards to debit cards,” said Ben Woolsey, director of marketing and research at “Credit card debt accumulated, and people got upset with banks for raising interest rates. People just started using debit cards more.”

Woolsey also said another reason that fewer college students own credit cards is because of the Credit Card Act of 2009. Signed into law in May 2009 by President Obama, credit card companies were restricted from selling their product as easily as they could previously.

“Now you must be 21 or older or have a cosigner that is 21 or older to technically qualify for a credit card,” Woolsey said, adding that he is “not sure to what degree banks are actually following that law. If a student is under 21, they’re supposed to ask you if you have sufficient income and, if you do, they can give you a credit card.”

Credit card companies are also prohibited by the Credit Card Act from coming onto a college campus to sell credit cards to students, Woolsey said. These companies, he said, often attracted students with free credit perks, such as chances to win a free vacation, new cars or Frisbees.

“I think a lot of the cards have big sign-up bonuses with rewards and they look enticing,” Woolsey said. “It’s really easy to kind of think of it as easy money.”

Managing finances

Using a credit card, students can encounter problems with managing their finances. Debit cards have grown in popularity primarily because it limits the purchases one can make based upon what users have in their account. Credit cards, on the other hand, will allow users to spend more than they own, leading to debt that can be tricky to pay off.

“It’s easy to spend more money than you have with a credit card. You’re not taking money out of your wallet. Unless you’ve got consistent cash flow coming in from a job, it can be kind of a shock to get a bill you can’t pay in full,” Woolsey said.

The biggest issue, as Patterson said, is that students spend on items without considering the consequences. Woolsey weighed in on that theory.

“The most common type of problem is that it’s hard to stay current with the service because they let it pile up,” Woolsey said.

Although she did “get nervous” at one point, senior physics major Tess Sage said she owned a credit card for two years without experiencing any serious issues.

“I was concerned for a little bit because I got tight on money. My whole family was pretty tight, and it was a little scary,” Sage said. She said she made it out unscathed from a close call.

Weighing the benefits

Woolsey, who has read a number of forums that deal with college students and financial debt, said that having a credit card is not essential to a student, but it has its benefits.

“If you get out of college without credit history, it can be hard to even rent an apartment. Employers use it as a measurement of your responsibility. It can be beneficial to get one in college,” Woolsey said, adding that irresponsible use can give the user a bad credit history.

Sophomore history major Adam Carlyon said responsible use can be beneficial to college students.

“I’ve had no problems, and I’ve had (my credit card) for just over a year,” Carlyon said. Building credit “will help me purchase a house, a car. I need to start building now.”

Carlyon also said that a credit card can serve as an “emergency buffer” for students to utilize in the event they are away from home and need money quickly.

“It’s not necessary,” Sage said. “I pay for a lot of things by myself. If I get into unexpected car trouble, I can use a credit card if I don’t have the money in my account.”

“It’s real easy to buy pizza and clothes and travel with” a credit card, Woolsey said. “A credit card enables travel and such online that are sometimes hard to do with cash. (The credit card) gives you a newfound freedom.”

Contact Jimmy Miller at [email protected].