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Concern growing over minor-age credit card debt

For years, the banking industry and other groups have focused on educating young people about borrowing and the importance of establishing and maintaining good credit. However, that message has never been more needed or important than it is today, according to many.

Credit card companies are marketing to an ever-younger demographic. High school students are now receiving credit card offers. And, these same youngsters are offered more and more opportunities to use plastic, swiping their cards for everything from a hamburger at a fast food restaurant to practically anything their hearts desire, and their credit can bear, on the Internet.

Minor-age credit card debt is a problem now that could grow into a crisis in the future. Some criticize credit card companies and their marketing efforts. However, lack of credit knowledge and awareness among teenagers is just as much to blame. So, groups are redoubling their credit-education efforts to give youngsters the tools they need to make informed decisions.

Childhood debt

When Evelyn Edwards graduated from Rust College, she had rung up $18,000 in credit card debt. Her parents were unaware that she had even one credit card. Edwards at that time actually held eight.

Today as Community Reinvestment Act officer at BancorpSouth, Edwards spends much of her time educating children on the nuances of credit, often using her early mistakes as example. The responses she gets from students coupled with her own personal experience trouble Edwards.

“When I ask, ‘How many of you own a credit card?’, more and more hands are going up,” Edwards said. “Then, I ask them things like what’s their grace period or do they have an annual fee. Generally, they have no idea.

“I don’t know about 2006, but in 2005, college-age individuals made up a large percentage of those filing bankruptcy. I’m not sure if that went up in 2006, but it is a definite concern.”

Judy Reagan is director of operations at Junior Achievement of Mississippi Inc. Junior Achievement’s goal is to teach grade-schoolers about America’s free enterprise system and their future role in it. The Mississippi chapter was founded in the early 1960s, and since that time has conducted courses on personal finance throughout the state.

However, Reagan said that this education has never been more critical than now.

“We’re seeing more and more kids with credit cards,” Reagan said. “The key is education. They need to learn about spending habits and how they can effect them personally and the economy as a whole.”

Both Reagan and Edwards said that credit cards are becoming a status symbol among teenagers. Holding a credit card makes them feel “grown up.” Unfortunately, credit card debt is an adult problem, one that can follow them when they graduate.

“I tell kids all the time that if they run up credit card debt now, when they get out and start making real money as an adult, they won’t be able to enjoy it because of the debt they have already incurred,” Edwards said.

Eric Smith is a loan officer with Community Bank in Lucedale. He participates in the “Banking on Your Future” program, a youth financial education program run by the Mississippi Young Bankers section of the Mississippi Bankers Association.

“What I try to stress with kids as far as credit cards go is living within their means,” he said. “Don’t spend tomorrow’s money today. It’s all about making wise decisions.”

Credit cards aren’t evil

The news with this issue is not all negative. One positive is increased parental involvement. Edwards also participates in the Mississippi Jumpstart Coalition’s Money Matters seminar program, another youth financial education initiative. Edwards said she is seeing more and more parents show up for these workshops with real interest and concern.

Edwards was also quick to add that credit cards are not all bad. Establishing credit at an early age is an obvious plus, and credit cards offer a means toward that end. In the hands of educated, disciplined and responsible teenagers, credit cards can provide a firmer financial foundation on which to build their adult lives.

Smith agreed.

“Credit cards can be an excellent way to start and build credit, as long as they are used wisely,” he said. “If you pay off your bills and live within your means, they can be great.”

Contact MBJ staff writer Wally Northway at northway@msbusiness.com.

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