White Mountain Partners shares how millennials are being tricked into credit card debt
Many millennials find themselves facing hundreds of thousands of dollars in debt right out of college. Unfortunately, debt is more than an anomaly for just a few millennials; having credit card debt has become the norm. As of 2019, Americans’ collective debt is beyond $4 trillion. It’s high time millennials begin to recognize that credit card debt isn’t just an epidemic–it’s a conspiracy brought on by credit card companies
The Conspiracy of Debt
With credit card companies targeting recent high school graduates and college students, it’s no wonder that millennials’ debt continues to rise. Though student loan debt certainly has an impact on millennials, White Mountain Partners points out that credit card debt has a debilitating effect on 41% of millennials. Whether they’re trying to get a mortgage to buy a house or hoping to rent their dream apartment, having an insurmountable amount of debt often stands in the way of doing so.
While waning credit scores are a widespread problem for millennials, they don’t have to be. Consider the following information to better identify how credit card companies trick students into taking on more debt than they should:
1. Many Millennials Don’t Understand the Impact of Debt
With most incoming college students overwhelmed by their lives outside of high school, it’s easy for many to warm to the idea of the instant access to a line of credit that credit card companies offer. In most cases, these students don’t understand the complexities of credit cards, interests, and monthly payments. These credit card companies count on the naiveté of college students and target them in order to take advantage of them.
Whether these college students have a stable job or not, White Mountain Partners warns that it’s incredibly easy for them to rack up hundreds of dollars in debt with their first credit card. In some cases, college students can turn to their parents to take care of their credit card bills. In other situations, college students end up leaving school with thousands of dollars of credit card debt that has already accumulated several months’ worth of interest.
In addition to taking advantage of college students, credit card companies set their sights on this demographic as they know they have a longer credit life. College students that aren’t responsible for their credit cards will often let their debt collect interest for the next several years, resulting in more money for credit card companies. Though responsible credit card users will pay off their debt before the interest has a chance to accumulate, credit card companies are counting on the fact that the majority of students won’t.
2. Millennials Fall for the Free Perks
If college students knew the true risks of owning credit cards, they’d likely run the opposite direction when accosted by credit card companies. However, these companies know just how to entice college students: with free perks. Though federal law prevents these companies from giving out tangible items to prospective applicants, many credit card companies trick college students into applying by offering free perks like coupons, discounts, or similar freebies.
College students that don’t know any better often recognize the short-term benefits of credit cards and any freebies and decide to apply. After students are approved, it’s often a downhill journey into debt from there.
3. Most Millennials Don’t Know Federal Credit Card Laws
After recognizing the affect credit card debt has on college students, the government put several laws into place to limit credit card companies’ reach. These federal laws prevent credit card companies from awarding credit cards to anyone under the age of 21 that don’t have a cosigner or evidence of steady income. While this law looks good on paper, it doesn’t stipulate what will qualify as a steady income or proof of age for applicants.
As a result, credit card companies often give out credit cards to anyone that applies. Thus begins the long journey into a life of debt for many college students.
The first step in avoiding debt is recognizing the tactics that credit card companies use to trap college students. Keep this information in mind to avoid making the same mistakes and digging yourself into debt for years to come.