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Helping UW-Eau Claire Students
Get a Handle on Credit Cards
MAILED: Feb. 28, 2003
EAU CLAIRE — Undergraduates are carrying credit cards in record numbers, and University of Wisconsin-Eau Claire students are no exception. Used wisely, these cards offer convenience and a means to establish a positive credit history. Unfortunately, some students unwittingly accumulate credit card debt and set themselves up for financial failure even before they graduate.
Some UW-Eau Claire faculty, staff and students are tackling the issue to come up with strategies to help students use credit wisely. The group includes Judy Blackstone, Counseling Services; Kathleen Sahlhoff and Susan Ausman, Financial Aid; Blaine Peden, psychology; Abraham Nahm, management and marketing; Lucretia Mattson, accounting and finance; and Matt Flaten, Student Senate.
After looking at the national data, which show that 83 percent of undergraduate students have at least one credit card and carry an average balance of $2,327, the group decided to gather evidence about the extent and impact of student credit card use at UW-Eau Claire. They created an online survey, which was administered during the 2001-02 academic year.
Modeled after national studies, the survey looked at how many credit cards students have, how they got them, interest rates, income level, monthly balances and hours worked. The survey also looked at attitudes about materialism related to credit card debt.
"Our purpose was to look at the evidence to determine the extent of the issue on our campus and to identify critical points for intervention," Mattson said. "We were looking for predictors of which students are likely to carry a monthly balance."
Thirty-one percent of the freshmen and seniors and almost 22 percent of the sophomores and juniors responded. According to their responses, 68 percent have one card and nearly 36 percent have two or more cards. Seniors are more likely to have cards, with 88 percent reporting one card compared to nearly 43 percent of the freshmen. Fifty-three percent of the seniors reported two or more cards, compared to 11 percent of the freshmen.
Among those who have credit cards, 14 percent of the freshmen carry some kind of balance from month to month; 4 percent carry a balance over $1,000. Almost 37 percent of the seniors carry over a balance, with 18.5 percent carrying over $1,000.
Monthly balances for freshmen range from $10 to $8,115, with an average balance of $72. Seniors' monthly balances range from $10 to $13,760, with an average of $574.
"We were encouraged to see that these percentages are below the national averages, but we were still surprised and troubled to learn about balances over $1,000," said Mattson, who analyzed much of the data.
Perhaps the most significant finding, Mattson said, shows that students with education loans, car loans and low incomes carry the most credit card debt.
"It tells us that students who are utilizing all available financial avenues are carrying the highest credit card balances, suggesting that poverty, not unnecessary spending, leads to credit card debt," Mattson said. "Perhaps we need to increase student loan packages or at least steer students to low-interest education loans so they don't turn to high-interest credit to meet their expenses."
The study showed that almost 40 percent of the students acquired their credit cards through direct mail solicitations, and another 25 percent through store offers. Students who got their credit cards from their parents carried the lowest balances. Those who got their card from on-campus solicitation had the biggest balances.
Eighty-one percent of the respondents said they were likely to go to their parents for help about their credit card balance. Most said they would not go to a financial aid counselor or to the university counseling service for help.
"It's reassuring to know most of our students have reasonable relationships with their parents, but somehow we need to get across the value of on-campus resources as well," Mattson said.
The students' lack of knowledge about their interest rate and how compound interest works is a major concern to Mattson, who teaches a personal finance course.
"This is an area where education can help people make better decisions about how they use a credit card," Mattson said. "Some students accumulate credit card debt, not planning ahead whether or not they can afford to borrow that sum and not aware of the actual finance charges they will pay over time."
For example, Mattson said, many students don't realize that at 12.9 percent interest it will take more than five years to pay off a balance of $1,443 (average monthly balance on cards from parents) making the minimum payment of $30, assuming there are no additional purchases on the card.
The survey also looked at the role of materialism as an underlying cause behind credit card debt. It showed that students with high materialism and a high level of compulsive buying have higher credit card balances, higher levels of anxiety and a negative attitude toward credit cards. Students with high materialism who want to establish a positive credit card history, on the other hand, have lower credit balances, less anxiety and a positive attitude toward credit cards. Students with low materialism have lower credit card balances.
According to Nahm, the model suggests that students could be helped on two fronts — by helping them to see the futility and perils of a materialistic lifestyle and by educating them on the importance of building a healthy credit history.
Students' comments noted on the survey suggested they might welcome help with these issues, Mattson said. A significant number said the survey made them think about their spending habits or made them realize they have a spending problem.
Flaten, a senior, knows firsthand how important responsible spending habits are and is in favor of limiting on-campus credit card advertising and solicitation. "I got a little over my head in my freshman and sophomore year and can appreciate the level of stress that some students go through over this issue. Limiting advertising is only part of the issue in trying to find solutions to this problem though."
Mattson said other solutions might include educational materials on the wise use of credit cards, a greater emphasis on low-interest educational loans rather than high interest credit to meet college expenses, a one-credit general education course and/or training personal finance peer counselors.
UW-Eau Claire News Bureau
Updated: February 28, 2003