Master your credit cards by finding the fine print

Tuesday, August 14, 2007
Jennifer Miinch, right, of Marble Hill, Mo. used her credit card Sunday in a transaction with Logan Koch, a teammate at The Buckle in West Park Mall. (Fred Lynch)

This fine print is one of the main ways credit card companies can fool teenagers, and even some adults.

"If it says free checking, zero percent APR, zero finance charges for 25 months, there's some catch," says Chris Bender from the National Foundation for Credit Counseling.

"They put all the cool stuff in large fonts or snazzy logos, and people get hooked," Bender said. "But it's never that good."

Credit card companies advertise the good and bury the potentially bad. Putting the catches in harder-to-read fine print is their primary way of telling the customer about all the angles. The consumer takes on the responsibility of learning those angles.

Understanding this information could become complicated without knowledge of the subject.

Richard Hartmann, a local financial adviser with Ameriprise Financial Services Inc. in Jackson suggested finance education in school.

"High schools need to have a program that teaches the students how to use a credit card and the dangers if they misuse it," Hartmann said. "The students need to be informed, not just given a credit card. They need to be shown an actual statement so they know what they are getting into."

Hatmann suggested a Finance 101 course.

"My child was recently handed a credit card," Hartmann said. "The bank said not to worry about paying it off, she can just pay the minimum."

This is a common statement made by banks, but can be very misleading, financial advisers said.

Gerri Detweiler, education adviser for Debt Counselors of America, pointed out that by sticking to minimum payments it would take a student more than 12 years and $1,115 in interest to pay off a $1,000 bill on a card with an 18 percent annual rate.

"Minimal payment plans are misleading," said Deidre Jewel, a bankruptcy attorney for the Lichtenegger, Weiss and Fetterhoff firm.

"Congress is increasing the minimum payment, which will actually pay off the principal and not just on the interest," Jewel. "It will still take years and years to pay off."

According to Nellie Mae, one of the nation's largest lenders of student loans, the average undergraduate has $2,200 in credit card debt. That figure jumps to $5,800 for graduate students.

"I see more and more young people are filing for bankruptcy in this day and age because credit cards are everywhere, especially on a college campus," Jewel said. "Students need to know as much about credit as they do about savings."

The Bankruptcy Institute estimates that 19 percent of the people who filed for bankruptcy last year were college students.

When a student graduates from college, he or she will most likely have student loans to pay off. In addition to the loans, most will have a credit card debt.

"If someone has one card that they are having trouble with," says Jewel, "chances are all of their other cards will follow suit. They will bump their charges also."

If this student is unable to pay off these debts, it can lead to bankruptcy or a student loan default. Either of which can lead to a poor credit record and score, which can make it difficult to borrow money for necessities like a car or home in the future.

Christina Chastain is a contributing writer for the Southeast Missourian.

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