The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

I Have Seen the Light

Posted by iusbvision on August 27, 2007

I have the answer. This summer was an educational one for me. I feel so good about it that I decided to share the wealth, literally! I was introduced to a real financial guru through The Dave Ramsey Show. It is a show solely dedicated to giving people financial advice. People from all over the country call in to ask for advice on handling anything from home foreclosures to this country’s biggest problem… credit card debt.

Money issues are a problem in this country that is often ignored, as are the benefits of financial freedom. By the way, when I write financial freedom, I mean NO DEBT. A massive lack of financial management engulfs Americans, which never fails to leave their personal finances and assets in a depreciating spot.

It was in listening to this show that I heard about a new documentary that recently came out called Maxed Out. It is a surreal documentary. It focuses on the dangers and ruthlessness of credit card companies. After watching this, I realized that good financial management is a problem for more than just those who were in their career, have a family and/or a mortgage. It can be and is a problem for college students across the country, and this is demonstrated well. It has been just in the last 20 years that credit card companies started targeting students. 

According to Cardratings.com: “In the late 1980’s student credit card limits were around $300-$500 and parents were required to co-sign.  However when credit card companies began making a lot of money during the 1991 economic recession, they started looking for new markets and found it in the student population.” The documentary spends a lot of time focusing on the tactics that these companies use to get students into the trap, tactics that I have even seen on our campus.  They will give you a pizza, a frisbee, a t-shirt or some other “freebee; all you have to do is just sign up! 

I remember a day last semester when a local business was handing out flyers that said “free sub meal” at the Blimpie on the corner. This sent quite a few  hungry college students to their store, just to find out that they had to sign up for a credit card to redeem the deal. Why do they do this? (I mean there is a lot of money invested into some of these freebees)

The first reason is easy, because you pay interest when you use your credit card. The next bigger reason is more elusive, but they bet on the fact that you will spend more money when you buy something with credit. This is absolutely true! Swiping that credit card is far less emotional than laying down a few Benjamin’s on the table. When you lay down cash, you feel what that item costs you right then and there, but with credit, it becomes tomorrow’s worry, so you spend more with a sense of temporary peace. 

Now some of you may wonder why it’s bad if you can make the payments. The problem is that even before you graduate from college and get a job, you can very easily find your self thousands of dollars in credit card debt, only able to make minimum payments, and paying a 25+% interest rate. 

Even if you manage to pay it off each month, the dirty fact is that you spend more. Also, it reinforces bad habits of not only paying crazy interest rates, but of being comfortable with having your most powerful wealth building tool, your income, crippled by payments. 

Here is a stat to create this picture in your head: According to consolidatedcredit.org “It would take roughly 12 years for a student to pay off a $1,000 credit card debt with an 18% interest rate if they are making only the minimum payments.” That’s crazy, right?! 

Here are some stats to keep in mind that can be found at consolidatedcredit.org:

  • 78% of college students have at least one credit card. Nearly 40% of Freshman student sign-up for credit cards …
  • Of the 78% who have credit cards:
  • Average number of cards = 3
  • Average total credit card debt = $2,748
  • 32% have 4 or more cards
  • 13% have debt between $3,000 – $7,000
  • 35 out of the nations top 50 credit card issuers now compete in the college market.

So if you are tired of making payments, or if you want to know the facts about those plastic cards in your wallet, I highly suggest watching Maxed Out. I know that after you watch it, you will be so shocked that you may decide to invest a bit in learning about how to manage your personal finances. I also suggest reading “The Total Money Makeover” by Dave Ramsey.  

If you are already in a financial mess of a situation there is hope, check out “Financial Peace”, also by Ramsey. If you think that this financial mumbo jumbo is not for you, think again because the average college graduate makes a couple million dollars over their lifetime. With the kind of earning potential that we all hope to have with our college degrees, what would it hurt having some financial knowledge and learning some easy ways to be smart with your money and truly live the American dream.

Marcus Vigil

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