Teen Credit Card Debt Statistics

Teen Credit Card Debt

Teen credit card debt statistics issued by the JumpStart Coalition for Personal Financial Literacy show that one out of three high school seniors use credit cards. Half of these students have credit cards in their own names.

Teen Debt Goes to College

Teens under 18 years-old cannot apply for a credit card without a parent's co-signature, but according to school loan provider, Nellie Mae more than 54 percent of college freshmen carry a credit card. By sophomore year, the percentage of students who own at least one card rises to 92 percent. Nellie Mae also reports that on average, freshmen bring an average of $1,585 in credit card debt to college.

These statistics are backed up by surveys conducted by Robert Manning, author of Credit Card Nation: The Consequences of America's Addiction to Credit. According to his findings, the amount of freshmen entering college with credit cards tripled between 1999 and 2002.

Evaluating Teen Credit Card Debt Statistics

Since teenagers under the age of 18 cannot apply for a credit card without their parent's co-signature, it makes it difficult to pin down statistics pertaining to teens and credit usage precisely. The number of teens that own and use credit cards - and how much debt they owe - can be masked by parental involvement.

Teens and Credit Cards

Controversy surrounds teen credit card use. Some people argue that credit cards teach teenagers to be financially responsible, but teen credit card debt statistics indicate an opposing reality. Providing a teenager with a credit card may actually teach them to be financially irresponsible. Unfortunately, this sad fact makes teens a target of credit card companies. Marketers have effectively convinced many teens and their parents that credit card ownership is like an initiation rite into adulthood.

Statistics show that credit cards do not encourage self-restraint in teens. Some may argue that through the use of credit cards, teenagers don't learn how to say no to themselves. Instead, credit cards promote the 'spend now and deal with the consequences later' mindset. Learning to say no is an important lesson for teens to learn because without it they may be on the road to incurred debt before they graduate college.

Consequences of Teen Credit Card Debt

Teens don't always realize the reality of excessive interest rates and fees. As credit card debt builds, students may lose out on admission to graduate school, a job, or an apartment because of their damaged credit history.

For some teens, debt can become enough of a burden to cause them to drop out of school. In Robert Manning's book, he estimates 7 to 10 percent of college students will drop out of school because of credit problems. Students buried in credit debt don't see any other way to pay off their debt and are embarrassed to admit to their parents that they can't pay it. Instead, they go out and get a job, work more hours than their class schedule can realistically handle, and grades start to suffer.

Training Teens to Budget

Parents can be the most influential element to teenagers when it comes to credit card usage. Whether parents realize it or not, they are modeling how credit cards should be used. This means that a teenager who sees parents constantly splurging with credit cards and then later complaining about not being able to climb out of debt will probably assume that this is simply the way it is. Parents need to not only talk to their teenagers about the proper usage of credit cards, but also need to show teenagers the intricacies of credit card use.

Parents may want to consider getting teenagers acquainted with credit usage at an early age by using one of the many pre-paid credit cards designed specifically for teenagers. Since the card is pre-paid by the parents there is no danger of the teenager going over the limit and incurring fees, and the parents can closely monitor how the teen uses the card. This can be a useful learning tool, and is much safer than handing a teenager a credit card and waiting to see what happens. Teaching teenagers about credit usage and budgeting is not a passive task.

Budgeting Tips for Teens

To help teens learn to manage money and live within their means, parents can help them establish a personal budget. Guidelines for parents to help teens curb credit card spending and to live on a budget include:

  • Helping them understand how much they have to spend.
  • Plan for savings to use in emergency.
  • Instead of using a credit card, shop with cash, a debit card or a check most of the time.
  • Pay cash for items under $10 and for eating out.
  • Have only one credit card, and if they use it plan to pay off the charges at the end of the month.
  • If they cannot control credit card spending-stop using the credit card.

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Teen Credit Card Debt Statistics