Directions: Read the following excerpt adapted from the U.S. Bankruptcy Court of the Southern District of California article “How Teens Get Sucked into Credit Card Debt,” and use the information and the Text Editor to write an essay that answers the following questions:
- How long did it take Andrea to build up $2,500 in credit card debt? How does she feel about her debt? What did she initially use her credit card for?
- How is Erin’s story different? Does Erin have debt like Andrea? What did Erin’s parents teach her about credit cards?
- Has this article affected how you think about credit cards? Are you more or less likely to apply for a credit card after reading this article?
- Do you think teens should have credit cards? Why or why not?
Teens and Credit Cards
In a world where commercials, magazine advertisements, and peer pressure work to convince individuals that they need each new gadget, vehicle, and designer clothing item on the market, it can be easy for individuals to live beyond their means, spending more money than they earn.
How does this happen? How can someone spend more money than they actually have? The answer: credit cards, harmless looking pieces of plastic that allow individuals to borrow money, usually at a relatively high interest rate. However, as many people learn the hard way, a couple of convenient purchases using a credit card—a pair of jeans today, some movie tickets next week—can easily turn into thousands of dollars of debt.
Read Andrea’s story: Between working three jobs, paying her bills, and trying to get out of debt, Andrea feels overwhelmed. “I just want to pay everything off,” she says. “I wish I didn’t have to struggle so much.” She’s only 19 and a sophomore in college. She has a lot of financial responsibilities; she pays her own college tuition and also helps pay the rent and utilities at home. The real problems began after she signed her first credit card application before she had even graduated from high school. “It was fine at first,” she says. “I used it mainly for gas. Then it just got deeper and deeper.” Within a year and a half of her 18th birthday, Andrea owed more than $2,500.
Each year, more and more teens fall into the credit card trap, many before they even enter college. According to the JumpStart Coalition for Personal Financial Literacy, an educational organization, nearly a third of high school seniors reported having a credit card of their own or one co-signed by a parent (a parent puts her name on the account so the student can qualify).
According to surveys conducted by Robert Manning, author of Credit Card Nation: The Consequences of America’s Addiction to Credit, the number of incoming college freshmen with credit cards tripled between 1999 and 2002. Those freshmen carry an average of $1,585 in credit card debt, reports student-loan lender Nellie Mae.
Erin Zimmerman was 17 when her parents helped her get her first credit card. She didn’t mind that she had a $300 limit, she says, because her parents explained how interest rates worked and how quickly she could get into financial trouble if she overspent: “They said it was like digging a hole.” Zimmerman, 18, is now a freshman at New Mexico State University, Las Cruces. She says she’s seen many classmates get into financial trouble using credit cards: “They don’t get the fact that you have to pay it back.”
Experts say that one way for young adults to understand how quickly credit card interest can build up is to have them play around with a debt calculator, a tool that allows the user to input information including total owed, interest rate, and minimum payment and then shows how long it will take to pay off the debt. There’s nothing like watching how minimum payments on a $1,000 balance ($20 a month at 12% interest) mean six years of debt. That’s two years longer than it takes to graduate high school!
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