Turning eighteen is a rite of passage. You can smoke, gamble, take out loans, lease an apartment—and you can apply for a credit card.
While a birthday celebration may or may not include one or more of the latter privileges, the first week is bound to include at least a few solicitations from credit card companies.
As alarming as it is that credit card companies know your birthday, that is the least of your problems. If young people aren’t careful, early credit card ads can become early credit cards, which can become early—and hefty—credit card debt.
Credit cards are dangerous toys for anyone. Three recent lawsuits, brought against credit card giants American Express Co., Discover Financial Services, and Capital One, demonstrate how these companies seem set on taking advantage of everyone, regardless of age.
According to the Los Angeles Times, American Express agreed Monday to refund a total of $85 million to 250,000 customers, for violations of consumer protection laws that included falsely promising bonuses, charging improper late payments and deceiving customers about the benefits of paying off old debts.
Discover and Capital One paid $200 million and $150 million, respectively, in settlements earlier this year.
In these cases, victimized customers were lucky enough to have the law step in. However, limited experience in the credit world makes young people particularly vulnerable to these kinds of tricks.
Young people also may not sufficiently grasp of the concept of debt. Most college students, particularly students at private institutions like USC, are still supported by their parents and have not yet been exposed to the mountain of expenses—food, rent, cable, cell phone bills, gas—that makes paying off debt exceptionally difficult. They haven’t yet experienced the negative consequences of spending too much.
Finally, according to the Federal Trade Commission, adults between the ages of 20 and 29 were the most common victims of identity theft in 2010.
Thus, while credit cards are a useful tool, they are also a pile of hazards for the young adult. Any student thinking about using one would do well to consider and understand the risks.