It felt good to spend money.
Jennifer Fuller handed over her plastic card, watched the clerk slip it through the reader and listened to the chug-a-chug of the machine giving her its approval: The card was good, Jennifer Fuller was good, and spending money was very good.
She was 19, and like many young people furnishing a first apartment, she was at IKEA. She had picked out end tables, a coffee table, display cabinets and candles, even pictures for the walls. Most of the items cost less than $100, but the sheer volume drove the total to more than $2,000.
That very day IKEA had invited Fuller to apply for a store credit card. IKEA didn't care that she already had credit cards at Macy's and Dillard's and Best Buy and Circuit City and Foley's and Abercrombie & Fitch and a few other places too -- or that the balances on those cards were already hovering near their limits.
And IKEA didn't care that Fuller was a struggling student at College of the Mainland, waiting tables at a Kemah restaurant to pay tuition. It only cared that some bank had issued her a Visa at a special student rate -- that was all the proof the store needed that Fuller was creditworthy. After a quick application process, the clerk handed her a card with a $2,600 limit and a whopping interest rate of 23.75 percent.
She maxed out the card in three hours.
"There's the instant gratification you get when you get something, it's great," says the 24-year-old petite, dark-haired woman, looking back on her fateful IKEA shopping spree. "But all of that stuff wouldn't even fit into my apartment when I got home."
Not long after the IKEA trip Fuller realized her $2,600 binge would end up costing her much more than what she'd charged -- and the price wouldn't come solely at the expense of her bank account. Soon, she would find herself gasping for air in sea of credit card debt that totaled around $20,000.
"Now that I'm an adult," she says, "I feel like a child because I've been so stupid."
But Fuller is far from the only college-aged kid who feels like a chump. One 2001 study by Nellie Mae, a major lender of higher-education loans, discovered that 83 percent of undergraduates have at least one credit card -- a 24 percent increase from 1998. The median balance on that card has risen to $1,770, up from $1,236 in 2000. Almost a quarter of the kids with cards carry balances between $3,000 and $7,000. Perhaps the most damning statistic is that, according to Nellie Mae, students double their average credit card debt and triple the number of cards they carry from the time they show up on campus to the time they graduate.
Just where these college kids are getting their cards is a source of controversy. In addition to special student deals like the one offered to Fuller, colleges and universities have been developing exclusive agreements with credit card issuers since the early '90s. These "affinity cards" sport the schools' logos and give a tiny percentage of each transaction to the universities or their alumni associations. These percentages can total in the hundreds of thousands of dollars a year. In exchange, the schools often allow the cards to be marketed to students at the student union, through the mail and even at football games.
"Colleges allow these companies to go hunting in a baited field," argues Robert Manning, a former University of Houston professor and author of Credit Card Nation, a manifesto that blasts schools for agreeing to such partnerships. "We're giving kids credit before they get their first job."
But what students are rarely getting -- at least according to those who want to stop the ease with which kids can get cards -- is any kind of financial education that would allow them to make wise spending choices.
Even Fuller is quick to say that students must hold most of the blame for their debt. If they're legal adults, then it is their own irresponsibility, their own hunger for quick gratification, that gets them into trouble. What Fuller's angry about is that no one ever taught her the rules of the game.
"Without knowing, I made the wrong decisions," she says.
Fuller has almost nothing to show for her massive debt -- only a television, clothes and IKEA furniture, some of which has since broken. The bitterest reminders are the six balances she still has to pay off.
"Express, Visa, two MasterCards, IKEA, Best Buy," she counts, ticking them off on her fingers. "Damn IKEA," she says with a sigh. "It's still at $2,500."
It started with a telemarketer's call during dinner at home with her mom. A dean's list student who wanted to go into public relations, Jennifer Fuller considered herself a bright girl. When the person on the other end of the line offered her a Visa at a special student rate and urged her to take this chance to build her credit, Fuller spent the ten minutes it took to apply and soon received her card in the mail. Its limit was $300, but over the years it was upped to $2,500.
Fuller is still not sure how the credit card issuer knew she was a student. The College of the Mainland never gives out students' names; it's one of the few colleges in the area that doesn't even allow credit card vendors on campus. But the companies can access a credit report, and Fuller's student loans would show up there.
In a matter of weeks, Fuller fell in love with her credit card -- not that she knew that much about how it worked. Growing up in Texas City, she'd taken sex education and drug awareness classes in school. But no one had ever explained what it meant to be financially literate. When her mother used a credit card to pay for something, she would remind her daughter not to tell her father about it. Credit cards were exciting little things, so exciting that they had to be kept secret. Above all, Fuller thought credit cards meant "buy now, pay later." It wasn't until months after getting her first card that she realized if you didn't pay off your balance in full at the end of each month, you'd have to pay interest.
"I didn't understand what finance charges were," she says, shaking her head. "I just knew there was a plus $45 on my bill."
The Visa card, and the thrill that came with using it, led her to apply for store credit cards. Soon, she was receiving applications for other major cards in the mail, and she applied and got accepted for those too, despite the fact that her income was only that of a part-time waitress. It was fun and adult to go to a bar and pay for everyone's drinks. It was easy to hand over the card and not think about where the money would come from. Mostly, says Fuller, "it was like a high."
The rush Fuller got from spending money is common, and those of college age can be especially prone to it, says Kristin Kassaw, assistant professor of psychiatry at Baylor College of Medicine. Kassaw, who has studied shopping addiction, says the pleasure of spending can develop into such a bad habit that people buy clothing and never even remove the price tags.
"There's probably a neurochemical basis for it, and there's also a cultural basis for it," says Kassaw. "If you think about the things people buy, they usually buy things that increase their self-esteem, items associated with status In college, you're in a new environment, you're with people you don't know, having to re-establish yourself outside the nest. If you have low self-esteem and you're trying to re-establish yourself outside the nest, that can lead to trouble. And no one in college is thinking, 'Oh, I'm going to want to buy a house, I'm going to want to buy a car, and all of this debt will affect my ability to do that.' "
And bad credit card habits in college can only get worse under the pressure of stepping out into the real world. Twenty-nine-year-old Chelsea, who doesn't want her real name printed, thought she'd take advantage of her time at the University of Texas to build her credit.
"As long as I didn't need to pay a fee to get the card, I signed up for it," she says. "They had booths at schools, I got offers in the mail. [I thought] in the future I would have a job that could pay for a lot of different things."
Of course, much of Chelsea's credit card debt comes from preparing for her first job as a high-powered consultant for an IT firm. She felt like she had to get the right place, the right car, the right suits. There were Palm Pilots and cell phones and pagers to be bought. Now she's paying down $10,000 in credit card debt.
"The thing I regret, in retrospect, is that I thought I would enjoy my job more," she says. "In hindsight I wish I hadn't committed myself so far by getting into debt to a job."
Sociologist Robert Manning argues that credit card issuers prey on most college students' lack of foresight. Now a professor of humanities at the Rochester Institute of Technology in New York, Manning has appeared on national television programs such as 60 Minutes II and Good Morning America to argue against credit card companies' getting into bed with colleges. He's also testified before the U.S. House Financial Services Committee, and founded a company that develops financial education programs for nonprofit organizations.
"Instead of going to South Padre Island for spring break, now you go to Paris," says Manning of the spend-more-to-be-more mentality he says is spreading on college campuses. "It's called a gold card, right?"
Manning also suggests that the rising cost of college education has pushed some kids into believing a credit card is a must to finance their education -- or at least to pay for necessities like books.
"Credit card debts are being 'revolved' or paid off with federal student loans or even with private debt consolidating loans," he writes in Credit Card Nation. "For growing numbers of students, credit cards are becoming a savior for financing their educations -- especially in public schools. For others, the initial freedom offered by credit cards may become financial shackles by the end of their college career."
But schools take little notice of such problems, says Manning. Almost all universities, public and private, have taken advantage of affinity cards. Rice University, the University of Houston and Houston Baptist University all have them (although HBU does not market to students). Most colleges and universities work with the Delaware-based banks MBNA and First USA. The schools can choose how heavily the cards are marketed, from football games to unsolicited e-mails, telephone calls and direct mail. Although the amount gained by the school on each transaction is often less than 1 percent, the pennies add up quickly. It's not uncommon for a school or alumni association to pull in $750,000 or even $1 million a year in transactions, he says.
One of the worst offenders, claims Manning, is the University of Oklahoma, which has a ten-year, $13 million deal with First USA to market Visa cards to students, alumni and employees both around campus and at football games. In 1998, a junior at OU hung himself in his bedroom closet after panicking over the $10,000 he owed on 12 separate cards (which he managed to get despite the fact that he made just $5.15 an hour part-time at a department store). The student's mother has publicly blamed the credit card companies for aggressively marketing to her son, claiming that she continues to receive card applications addressed to him.
Affinity cards weren't always available to students. When they were first dreamed up in the late 1980s they were known as alumni cards, and graduates were the only people who could get them. But universities soon realized what a sweet deal they were getting, says Harvey Warren, president of the National Consumer Council. The nonprofit education and advocacy group in Washington, D.C., recently ran a series of public service announcements warning college students against amassing credit card debt.
"It kept spilling downhill," says Warren. "You follow the logic. If we do it for alumni, let's do it for seniors because they're going to be alumni soon and we can catch them before they get out. And as long as you're considering seniors, why not juniors -- they're going to be seniors. And sophomores need to buy books, and don't forget the poor freshman."
The argument that college kids are adults gets a laugh from Warren.
"What is the difference between a high school senior and a college freshman, except for geography and 60 days?" he asks. "In the drive to college they became financial wizards? It's absurd."
Chinh Nguyen, 24, a graduate of Cypress Falls High School in northwest Houston, says it was a table at a football game that persuaded him to get his Texas A&M affinity card. Currently a senior at A&M, Nguyen was raised to believe that credit cards were not necessities but privileges. But on that day outside the stadium, Nguyen saw the free T-shirts being handed out with each completed application. It's common practice to entice students to sign up with free gifts such as a bag of M&Ms, a Koozie or a mug.
"I don't think I was hog-tied into it, but I did want that T-shirt," he says. "It was an A&M shirt, and I hadn't done my laundry in a while."
Nguyen, who works 25 hours a week in addition to being a student, says he has been careful with his card. His balance is just under $2,000, and it doesn't worry him. He has used the card only for necessary purchases like books, and he doesn't take it with him when he goes out at night. His parents wish he didn't have a credit card -- they even offered to lend him money for books. But Nguyen says the card was his way of establishing independence.
"At the time," he says, "I was trying to get away from my parents' watching me."
Nguyen is the typical face of college credit card holders. Whereas 20 years ago it was rare for a student to have a card -- much less to carry a balance -- Nguyen says he is not unusual among his friends. He lives with three other guys, and they regularly receive applications in the mail.
"They send a lot of stuff to your house," he says. "Right now I tear up the application and mail it back to them just so they can waste the 37 cents." But, Nguyen admits, he realizes not all his peers are following his lead. One friend with three cards used credit to pay off some school tuition. He currently owes around $10,000.
Affinity card issuers aren't the only companies allowed to set up booths on campus. Rice, University of Houston, Houston Community College and the University of St. Thomas all allow a variety of credit card vendors to set up booths. (HBU does not, claiming that the practice would go against the school's philosophy.) The schools don't collect much from the vendors -- less than $100 each visit in most cases. But Manning says the booths "nurture an environment where students don't understand the consequences of getting in debt." These booths -- in conjunction with pervasive national advertising (Citibank Visa is, after all, "The Official Card of Spring Break") -- make the college campus a heady place for any student contemplating plastic.
At Rice University the student union staff had to rewrite policy in the fall of 1998 after credit card vendors started throwing T-shirts at students and yelling at them to stop by their booths.
"We can't allow vendors to harass students," says Boyd Beckwith, assistant dean for the student center. "The students must approach the table and the vendors must speak in normal, conversational voices." Beckwith says students have access to booths that offer not only credit cards but cell phones, posters and crafts as well.
"We even had a group selling mopeds, because that's the hot new thing this year," says Beckwith.
The state of California is attempting to one-up Rice's policy against aggressive vendors. In 2001 the state legislature passed assemblyman Paul Koretz's bill that asks (but does not require) all public and private two-year and four-year colleges to prohibit inducements like candy and T-shirts when recruiting collegiate cardholders. It also asks that colleges have mandatory financial education during orientation. A few other states are considering similar legislation, but Texas is not one of them.
At the federal level, Congresswoman Louise Slaughter, a Democrat from New York, has introduced the College Student Credit Card Protection Act twice since 1999. The bill, which would put a cap on credit card limits for college students, has yet to pass. The credit card industry, says Manning, is simply too powerful.
"Now, for the first time, we're seeing them going after high school students," says Manning, who adds that debit cards with overdraft protection are being marketed to kids before they even go to the prom.
"The question is," he says, "how low are they willing to go?"
If you ask MBNA spokesperson Jim Donahue, Robert Manning is nothing more than a Cassandra from Greek tragedy, spouting proclamations of doom for college kids who continue to use plastic at today's rate.
"I'm not sure what Mr. Manning's intentions are, but I'm sure they're noble," says Donahue. "There are plenty of anecdotes [of college students in debt], but there's quite a bit of statistical information that people choose to ignore."
According to Donahue, MBNA has affinity card relationships with about 700 colleges and universities across the country, including Rice University. Those relationships have produced about three million accounts, and only a third of those are student-owned.
"At MBNA, we set very specific limits; we don't accept every student who applies for a card," he says, declining to divulge how many are turned down. Most students who do receive cards get limits of $500 to $1,000, and MBNA's studies show that the average balance for most college kids is only $552.
MBNA's studies show that "people 18 to 23 who are not in college have a balance that is three times higher," says Donahue.
The spokesperson also says that the majority of debt students shoulder when they graduate is in the form of loans, not credit cards, "but student loans are somehow seen as more virtuous." Credit cards serve a useful purpose on today's campus, he argues. Students use them to buy books, meals and plane tickets home.
To those who think MBNA is taking advantage of a population that is underinformed about credit, Donahue says his company has an educational Web site and offers to run workshops on college campuses about proper usage of a credit card. MBNA, says Donahue, is helping young adults get used to the way the economy operates today.
"The world's changed from 20 years ago," says Donahue. "Credit cards are a part of today's real world. They are ubiquitous, and if they haven't already, they will soon replace cash. College is the time to learn about the real world."
Eric Johnson, vice president of resource development at Rice, oversees Rice's department of alumni affairs. He declined to say how much money Rice acquires from its affinity card relationship with MBNA, saying only that the money goes to special projects, such as updating the alumni Web site. Rice was careful when mapping out its relationship with the bank, says Johnson, requesting that students and alumni be solicited only through direct mail, not by e-mail or telephone.
Johnson says he understands that parents might be upset to learn that their kids can acquire a card in their first few months on campus. But, he says, "I think it's up to the parents to decide whether the kid gets a credit card." Of course, MBNA applications don't require a parent's signature for students who are at least 18.
The University of Houston, which asks alumni and students to "reward your Cougar pride" by getting an affinity card, also would not divulge the amount of money it makes on its relationship with First USA, claiming the arrangement is proprietary information. Steve Hall, president of the university's alumni organization, says the card has been in existence since 1992 and less than a fourth of the cards belong to undergraduates.
"The money goes to educational and social programs," says Hall, "including over 80 scholarships a year."
Hall also argues that UH students are not typical college undergraduates, since the average age on campus is 26, not 18.
"The research I have seen shows that the overwhelming majority of students arrive with cards when they get to the university," he says.
But even if they are showing up with cards in their wallets, it's a safe bet that they haven't been taught how to handle them. After all, it's likely that their parents are in debt as well. According to Harvey Warren's group, the National Consumer Council, the average U.S. household has ten credit cards, with an average interest rate of 18.9 percent. The average total balance is around $8,000, and almost half the households in America report having a difficult time making their minimum payments. In 1998, personal bankruptcies hit an all-time high of 1.4 million, although that number has declined slightly in recent years.
"Credit is not magic, and kids need to learn that," says Danette Tidwell, program manager for the Texas Jumpstart Coalition, a Dallas-based nonprofit that advocates more financial education in Texas schools. Tidwell cites a 1997 national study by lender Fannie Mae showing that only 5 percent of high school seniors scored a C or better in a personal finance assessment quiz.
In addition to learning about credit cards, she says, Texas children need to be taught the basics of saving and checking accounts, insurance and investing. The coalition, which works to put schools in touch with the numerous free or low-cost financial literacy programs offered by banks and credit unions, is backing a bill in the Texas legislature that will make some form of financial education mandatory in Texas schools.
Not that Tidwell expects a warm reception among educators. Teachers in Texas are pressured to ensure their students pass the Texas Assessment of Knowledge and Skills test, says Tidwell, and credit card lingo isn't on the exam.
"If they would consider putting things on the test relative to financial education, it would make the test more relevant," she offers, stressing that a teacher doesn't have to revamp her entire lesson plan to squeeze in a little instruction on dollars and cents.
"A course can be taught in pieces of 30 minutes," she says. "You can find so many resources out there already, you don't have to reinvent the wheel."
MasterCard, for example, recently teamed up with the College Parents of America organization to distribute 175,000 brochures over the past four years to college students and their parents. While the colorful materials come with MasterCard's logo on them, a card application isn't included.
But, Tidwell says, that information is bound to be biased. "They describe the credit card as if it were a debit card -- you can pay for your housing, your books" with the card, says Tidwell. "I think, 'Oh, dear, that sounds too easy.' Students need to learn about budgeting."
It's also important to understand that, contrary to popular belief, credit cards are not the best way to establish credit history.
"I think one main reason that college kids obtain credit cards, aside from prestige, is they know how important credit is," says Rudy Cavazos of Houston's Money Management International, a nonprofit credit counseling service.
Cavazos has a weekly money matters segment on the Telemundo network and has spent years counseling college students in debt. He has seen countless young adults who believe that getting a credit card is the first step on the road to one day buying a house.
"Your first choice to start good credit is establishing a relationship with a financial institution like a bank or credit union," he says. "You handle those accounts responsibly, you don't write bad checks, and you deposit consistently. The loan officer at that bank or credit union is going to look at that when you come in to ask for a loan, and it doesn't matter if your credit file says you own an American Express."
Credit cards are also not a good way to pay for college, says Cavazos; lower-interest student loans are always a better option. In his years helping students in trouble, he's come to believe that it's better to take more than four years and finish college on fiscally solid ground than it is to land in massive credit card debt.
"I talked to one student who was in a master's program to become a teacher, and who was in credit card debt for $125,000," he says. "She said she lived off her credit cards. She'll never pay that off."
Despite such horror stories, Cavazos realizes most college students will still get credit cards. He recommends picking one -- and only one -- with at least a 20-day grace period, no annual fee and a reasonable interest rate. For students who get in over their heads, he advises talking to individual creditors first to see if a lower interest rate can be negotiated. If they choose to consolidate their debt, students should be sure the service they choose is accredited by the National Foundation for Credit Counseling, and that only nominal fees of $10 or $20 are charged. Fly-by-night consolidators do exist: One took $1,000 from Fuller before closing up shop and disconnecting its phone lines.
Jennifer Fuller used to go shopping and pay for a round of drinks at the bar. Now she works. Constantly. Any moment spent not earning money is, to her, a waste of time. "This week, I clocked out with 70 hours," Fuller says, referring to her job at the Riviera Grill downtown. "I asked to work extra. I don't need to waste the morning sleeping in and getting up at two-thirty."
She usually holds it together under the stress, she says. But there are moments when she breaks down over the mistakes that led her to amass nearly $20,000 in credit card debt.
Fuller got married a few years ago, and her husband works with her at the Riviera. He's been instrumental in helping her chip away at her debt -- after all, it's become his debt, too. The young couple won't be able to buy a house or have a baby until it's taken care of, she says.
"I would love to buy a house, but within the next five years it's just not realistic because my credit is so bad," she says. "It's horrible. I'll be almost 30 and I won't be able to buy a house because my credit problems from when I was 19 are still haunting me."
Every month, Fuller's husband sorts through her bills, figuring out payment plans and making sure they avoid $25 late fees. Right now, Fuller estimates, they owe about $8,000. The couple operates strictly in cash -- when the money's gone for the week, it's gone. They've even considered trying to get by with just one car.
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"I don't spend anything," says Fuller. "I can't remember the last time I really bought something, except for Christmas. And that was all in cash."
In the apartment Fuller shares with her husband sits a relic from her spending-spree days: a 50-inch television set that she bought at Conn's. It cost $2,500. She put it on a Conn's credit card, of course. She had a great TV already, but she felt she deserved a bigger one. "It's all about status," she says. "What you have and what you can get." The set loomed so large in her tiny first apartment that when she watched it, she felt like she was sitting on top of it.
If, at age 19, she had known that it would take her almost five years to pay the television off, and that with the interest rates and the late charges it would end up costing her almost $4,000, and that she would have to drop out of school and wait tables into the late hours of the night because of it Well, if she had known, she never would have looked at the TV twice.
"If I had known more, I wouldn't have gotten myself into all of this," she says. "You don't build equity on a $4,000 television set and some clothes. But we're sending children out into the world and they don't know what's going on except for what they see, which is 'Put it on the card.' "