August 14, 2009

Credit Card Debt as Rite of Passage

Posted by Adam Waxman at 1:29PM

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Today, I reached an important milestone in my young adult life. Today was payday; one of the first things I did was log on to my bank account and make a final payment on a credit card that I have had for over two years. I’ve racked up several thousand dollars of debt on this card, and today I finally brought the balance down to zero. It’s weird to think about my credit card as a sort of rite of passage, but that’s almost what this feels like.

My credit card, like many young people who are in my situation, was not used to pay for lavish vacations, or a new television, or an X-Box. I used it to pay for basic necessities when I did not have a real income – things like food, clothing, and the like. Later, I picked up a bit of debt putting a deposit on the apartment that my finance and I now rent. It’s ironic to me that as we’re about to renew the lease this September, I’m finally free of the initial debt.

Credit card debt as a way of life continues to pervade youth culture – forced on young people by the banks that profit from our indebtedness. Many young people are first introduced to credit cards when they arrive at college – by companies that have struck deals with their campuses to have access to the market. 84 percent of college students have credit cards, with an average debt load of over $3,000. Of course, with the passage of the CARD Act, companies will stop having as much access to students as they used to. The Associated Press reported this week how companies are looking to revamp their marketing practices. One of the thing that was interesting to me was a comment by a credit union executive:

"I think you're already seeing some changes in the marketplace," said Gary Perez, the chief executive of the University of Southern California Credit Union. "I do believe that you'll see a radical change in the manner in which card vendors and card companies approach college campuses."

Perez, whose 52,000-member credit union stopped issuing cards a few years ago because it couldn't compete with big banks' massive marketing budgets, expects to get back into the business by winter.

So, should we expect to see a more diverse group of creditors going after students and young people? Is this any better than a monopoly? Credit unions often have better rates that for-profit banks, but that doesn't mean it's necessary good to be promoting what Tamara Draut calls "the plastic safety net." The other question for me about all this is this - if the credit is no longer available, will people realize how depressed wages and exorbitant prices for things like housing and education keep young people trapped in debt out of simple necessity?