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UB ENG 102 - ENG position paper

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Since the last 40 years, credit cards have been the most popular innovation made in this economy. No other product or service was able to compete with the idea of postponing your payments. Trading of goods is what keeps the heart of an economy pumping which is why when a person charges their cards, businesses are able to gain money that they wouldn’t have received otherwise. This little piece of plastic is used in majority of the transactions taking place today. The popularity of this is well justified as it allows people to be able to afford luxuries which requires them to have a higher income than they currently possess; College students fit into this criterion oh too well. They don’t only make up a large portion of the population but are also major consumers. Their age and experience makes them vulnerable and more prone to impulsive buying. Just as how a coin has two sides, credit cards too has the ability to adversely affect the current U.S. economy and college students who may play a big role in it.Charging your card means borrowing money and therefore being in debt. To bring in a general idea of how credit debt affects the economy, let’s say “Jack” exclusively shops using his credit card. Once this card has been maxed out, he has lost his spending power. For an economy to thrive, there needs to be a balanced amount of spending. On top of this, Jack now has a lot of interest to pay which further limits his ability to spend. In a broader sense, the nation’s debt affects the rate of interest at which money can be borrowed and the amount of taxes on properties and consumerism. The high interest rates and taxes are partially to recover the money that has not been repaid. Moreover, when the nation’s debt is too high it essentially leads to the government spending less on public projects such as construction of roads and infrastructure. In doing so, there would not only be fewer jobs and opportunities, but the government would also not be able to provide loans for smaller business ventures, all of which leads to low economic growth.The transition towards making credit cards easily accessible to college students allowed them to not worry about certain risky purchases through college. The literature reveals that spending and credit card use among college students is on the rise (Hayhoe et al., 2000; Roberts and Jones, 2001). By being able to make pleasure purchases that they aren’t completely capable of making does seem to be good as it boosts consumerism. What one simply ignores here is that they do not generate enough income to pay off their balances which definitely hurts them. Only 43% of full time students and 78% of part time students had a part time job in 2015 among which 3 out of 4 students have jobs in customer service. These are primarily low paying jobs which certainly do not cover most of their expenses, but by having a part time job and getting an allowance from their parents, the average student income is about $1,200 per month. Generally speaking, college students expect to earn more after they graduate. At least enough to be able to live on their own wallet. This might make them better consumers in the future but in the present, it could just lead to more individual debt.The ability to buy houses or cars is linked with the individual’s credit score. Credit score is a number assigned to a person that indicates to lenders their capacity to repay a loan. One of the strongest arguments made in favor of owning a credit card while they are in college is that they are able to start establishing good credit. This is due to the fact that many students want to be prepared for the future by fulfilling the requirements necessary to make such large purchases. Sallie Mae, a major private student loans company, reported that 56% of students, age 18-24, holds a credit card. “Eighty-four percent of undergraduates carried at least one card, and only 17% of students paid off all their cards each month. Nearly one-third put their tuition on their credit card, and 92% charge direct education expenses to credit cards. All of these numbers represent increases since Sallie Mae's 2004 study” (Hogan, Eileen A., et al., 2013). This debt is what will actually end up affecting them in the future. Having large debts and being unable to repay does not only discourage a person to spend more but largely affects their credit scores. Having low credit scores would either prevent lenders to give money or they will charge a much higher interest rate. So, this intention with which a credit card has been owned could inversely affect the student.The main concern is knowing happens when students carry large amounts of credit card debt. To understand this, we need to know that college students have very limited financial knowledge. Students upon entering college have minimal financial knowledge but are responsible for managing more money than before. Research has shown that most college students get their money management skills from their parents. Further studies have shown that there is a correlation between the amount of debt a student carried to their academic success. “Students with high debt levels report a decreased sense of financial well-being and higher overall levels of stress.” (Norvilitis et al., 2003, Norvilitis et al., 2006). When students experience financial difficulties which in this case is large amounts of credit card debt, they tend to cope with it in a manner that proves futile. In rarer cases students have been known to fall into depression due to the stress of not being able to pay their bills. Other students tend to drink more or shop more to not feel stressed. This obviously just leads to falling deeper in debt. Another way students try to cope is by working more. Taking in more shifts, coming to class with a hangover means that they are able to spend lesser time in class and detracts them from studying. “All of these undesirable academic behaviors and cognitions may affect grades and potentially result in academic dismissal or dropping out, or increase time to graduation.” (Hogan, Eileen A., et al., 2013). In a perfect world, students would go to college and then graduate and get a job and join the next group of consumers who helps the economy; But this isn’t a perfect world. So when a student drops out due to financial stress, they are more likely to take smaller jobs to repay their existing debt and definitely limits their spending power.One


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