Credit Cards Bigger Part of College Debt

No sooner than many college graduates collect their degrees they have to start paying off debts: student loans and credit cards. Expert Ruth Susswein of the advocacy group Consumer Action says the key is to pay on time and to pay as much over the minimum as possible. Susswein talks with Renee Montagne about how college students can pay off their credit card debt or avoid it all together.

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STEVE INSKEEP, host:

Now on Fridays we talk about your money, or whatever money you have left over after filling the gas tank. And today we'll talk about college students and their credit cards. Many no sooner collect their diplomas than they have to start paying off debts - and Renee says that doesn't just include student loans. It does include credit card debt.

RENEE MONTAGNE, host:

That's right. Ruth Susswein is with the advocacy group, Consumer Action. She joined us in our studio in Washington. Good morning.

Ms. RUTH SUSSWEIN (Deputy Director of National Priorities, Consumer Action): Good morning.

MONTAGNE: In the last decade or so, credit card companies have started aggressively courting college students I guess as much as anybody else. I mean, they've been very aggressive generally. But even in the first day of school, students will often be offered a teaser rate, and that's a low introductory rate on a card. What effect has this had on student debt?

Ms. SUSSWEIN: The thing that's amazing about credit cards when it comes to students is that it is the only time in your life when you can get a credit card without a job. Graduate from school and try that, and it just won't happen.

But I think the key for students is to realize that they've got to pay this debt back above and beyond all the other debts that they've got. And they make it out of school and be expecting to make a lot more money at this job and feel that it will be very easy to pay it back, and it may not in fact be that easy.

MONTAGNE: And what should students do, both while they're in school and then when they get out of school?

Ms. SUSSWEIN: Well, the primary thing that everyone should do, and certainly students, is pay your bills on time. You know, we often hear from people who say I paid the bill - if it got there a day late or two days late - but I paid it. And that's not the way the credit card companies look at this. Lenders see if you have paid your bill on time, they consider you a good customer, particularly if you carry a balance.

And if you're someone who pays late, they may ding you with a late fee of as much as $39. And then they may turn around and say, you know that teaser rate, that low introductory rate that we offered you - or your regular rate, which maybe is 15, 17 percent interest - we're now going to double that. And now we're going to charge you 30 percent interest on that same balance. And so now you've got to pay off that same debt at twice the interest.

MONTAGNE: Is that partly the reason why a student might rack up quite a bit of a debt?

Ms. SUSSWEIN: Definitely. That's one of the reasons. The other thing to look at when it comes to paying late is, this will affect students when they get out of school and they start looking for a job, when they start looking for an apartment to rent. They may want to go get a car loan. All of those potential lenders are going to look at their credit report, and they're going to make a decision based on how well you pay them, and the key is paying the bill on time.

MONTAGNE: What is a college grad to do with a new job and probably loans that they have to pay off?

Ms. SUSSWEIN: Pay as much over the minimum as possible. If you can pay the whole bill off, terrific - that's the best bet. Then you're using that card for your convenience. If you can't pay it off in full, then at least pay as much over the minimum payment as you can, because the longer you carry that debt, the longer it's going to take to pay it off and the more it's going to cost you.

MONTAGNE: Thank you very much for joining us.

Ms. SUSSWEIN: A pleasure.

MONTAGNE: Ruth Susswein is an advocate with Consumer Action.

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