Student Voice


July 2, 2022




Faculty answers money questions

October 25, 2007

I often get questions from students, so I thought I would share a couple of them with you, along with my responses:

Dear C. BEAD (College of Business and Education, Associate Dean):
My grandma, Penny Pincher, worries about me all the time. She thinks I spend too much money (actually that I charge too many of my purchases). Grandma Penny thinks that young people today don’t understand how to save money for something they want to buy. She says that we want “immediate gratification” so we just “pull out the plastic” and buy too many things without considering the long-term consequences. How can I convince Grandma Penny that she’s “living in the past,” because credit cards are essential to survive in today’s world?
TYVM!  Maxed Out Mandy

Dear Mandy:
I have good news and bad news for you. The good news is that using credit cards (responsibly) is very important for anyone, especially college students who want to establish good credit ratings before they graduate and embark on their new careers. If you have a credit card, you should use it wisely and pay off the balance in full each month. Otherwise, you may get overextended and have to pay excessively high interest charges or late fees.

The bad news is that I spoke with a Senior Outreach Studies group on campus today, and they all agree with your grandma. Many people (young and old) don’t know how to save money for things they want to buy. They often make “impulse” purchases with their credit cards and don’t worry about how they will pay the bill. Recent U.S. data for college students show that on average they carry $2200-2800 in credit card debt. Students who graduated from college in 2006 also owed an average of $21,000 in student loans. If you use a conservative estimate of 6 percent and a 10-year repayment period, the average monthly loan payment for these students would be $235. If you add this to the rent, transportation costs and other expenses related to starting your career, you will need to land a better than average paying job to pay all of your bills. Therefore, I encourage you to follow your grandma’s advice and think twice before “pulling out the plastic!”
Spend wisely!  C. BEAD

Dear C. BEAD:
I really need your advice. I just received one of those letters that tells me I am pre-approved for a low interest rate (2.9 percent for the first six months) credit card and all I need to do is call their toll-free number to register. Since I get one or more of these letters every week, I usually throw them in the garbage. However, this one came on a day when my roommate and I were planning a Spring Break trip to Mexico, so the opportunity to charge the $1,000 trip cost, and pay it off at a later date, was very appealing. What do you think I should do?
PLMK! Confused Colin

Dear Colin:
I would find another way to pay for your trip. These credit card offers that seem “too good to be true” usually contain many hidden costs. Make sure you read the fine print before signing up. After the six-month trial period, the interest rate will probably increase to at least 18 percent. At this rate, and assuming you are only able to make the minimum payment each month, it will take about eight years to pay off this charge and the actual cost of your Mexico trip, including interest charges, will be over $2,000. Please tear up this letter and find another way to pay for your trip (or make alternative plans for Spring Break).
There Is No Such Thing As A Free Lunch (TINSTAAFL)!  C. BEAD

Brian Schultz is in his 29th year as a faculty member in the Economics Department at UWRF. He has been associate dean in the College of Business and Economics for the past four years, and serves as director of the UWRF Center for Economic Education.