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Ohio State study says credit card debt becoming tougher to pay off

Courtesy of MCT

Many college students think opening a credit card is the only way to start building a good credit score, but some experts said snow-balling debt will leave some young people with bills they’ll never pay off.
Ohio State economics professor Lucia Dunn conducted a research study that concluded younger Americas are accumulating more credit card debt and taking longer to pay it off than generations before them.
“It is true that when you go to buy a car or get a mortgage they do want to look at a credit report on you,” Dunn said. “But you don’t have to get a credit card.”
Dunn said paying rent and utilities regularly can figure into a good credit record, without the need for a credit card or the temptation to spend on frivolous items.
According to Dunn’s research published in the January edition of the journal “Economic Inquiry,” those born between 1980 and 1984 are estimated to have roughly $5,500 more in credit card debt than their parent’s generation and about $8,000 more credit card debt than their grandparent’s generation.
While that age group doesn’t fit the average undergraduate college student, Dunn said she predicts this trend will create future financial problems if the cycle continues.
Josh Goldfarb, a fourth-year in communication, said he sees the negative consequences that credit cards can bring to students, as well as the benefits.
“Students can be irresponsible, so there’s always a risk associated with that,” Goldfarb said.
Goldfarb said he’s never had a credit card but understands why other students do.
“If you’re a responsible student, I don’t see why starting your credit card history early is a bad thing,” he said.
Dunn agreed that a credit card is great to have for emergencies but suggested users pay it off every month.
“Just get in the habit of paying it off,” Dunn said. “You should aim at paying more than the minimum.”
Doubling the minimum payment to establish good habits and avoid the stress that credit cards can bring to students was one of Dunn’s suggestions for students.
Brittanie Russell, a second-year in biology, said she knows people “who have credit cards just to blow money and the interest builds up.”
Russell said she does not want to get into the same situation and has avoided applying for a credit card.
Sarah Hackshaw, a second-year in communication psychology, said she would advise her peers against credit cards if they do no understand the long-term effects.
“I think people should be educated if they want a credit card,” Hackshaw said. “College students aren’t fully educated about the responsibilities of having a credit card.”
After Dunn’s research, she has advice for students who already have or are considering opening a credit card.
“Use credit very cautiously, if it’s something that enhances your future well-being, if it’s an investment in your own human capital, go ahead and use it,” Dunn said. “Don’t carry a balance for something that’s purely entertainment.”

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