A recent survey conducted at five U.S. college campuses shows that despite a large majority of U.S. college students owning a credit card, most students do not understand their card or its associated fees.
Almost all of the 725 respondents in the survey were business students in fall 2009. The survey found that 70 percent of students own a credit card, and 70 percent with a card do not know their over-balance-limit fee, 75 percent of students do not know their late payment fees and five out of six students do not know the interest rates associated with their cards, according to Fox News.
“Our students lacked even basic financial knowledge of a common credit tool that many of our students used every day,” the study found, Fox News reports. “There is no way to describe these results as a success in education of financial literacy.”
The survey also found that more than 90 percent of college students that own and use a credit card are burdened by credit card debt.
“In America, credit cards on campus have been a disaster, leaving students buried in debt before graduation, often with little hope of paying off the debt before high fees and interest double the amount,” the study’s authors said, according to Fox News.
David Wegge, executive director of the Strategic Research Center at St. Norbert College, explains how credit card companies attract college students.
“A lot of students have been lured into getting credit cards by companies that often set low initial limits and then start pumping them up,” Wegge said, Fox News reports. “They get into it as a way to enhance their cash flow, but they’re not really thinking too much about the long-term ramifications about what they’re getting themselves into.”
The authors of the study pointed out that financial literacy in the U.S. is disappointing, even for those with a college education.
“If our college students do not understand credit costs, what can we expect from the larger portion of our society without a college education?” the study said, according to Fox News. “These results should serve as a wakeup call for both our college students and our college outreach efforts into the community to train people about the costs of credit. It is clear the status quo of financial literacy is a failure.”