Credit Trends: Fewer Cards, Less Debt

Surveys suggest that college students may be wising up about credit card debt.

By + More

Despite the perception that credit card debt is a widespread problem on college campuses, recent survey data suggest that credit usage among students has been declining over the past decade, along with average credit card debt. Possible reasons include better education and awareness about debt and also the increasing popularity of debit cards, which allow users to make payments directly from their bank accounts. Here's a look at the trends:

Fewer students own credit cards. According to Mintel, a research firm, credit card ownership for 18-to-24-year-olds has been dropping over the past five years. In 2002, about half of that age group had a credit card. Last year, only 40 percent did.

Debit cards appear to be replacing them. About 65 percent of full-time students at four-year colleges have debit cards today, versus 30 percent a decade ago, according to Student Monitor. In contrast, credit cards have declined in popularity over the same period, from 38 percent holding credit cards today versus 56 percent in 1997.

Average credit card balances may be declining. Student Monitor found that about 35 percent of full-time undergraduates at four-year schools carry a balance on their credit cards and that the average monthly balance is $559, down 11 percent from last year's $625.

Credit card balances get higher as students progress through college. Student loan provider Nellie Mae, which looked at students who applied for its college loans, found that those in their last year of school carried an average balance of $2,864.

Most students who have credit cards carry only one. The average student cardholder has 1.1 cards, according to Student Monitor.

Graduate students carry more debt, and it appears to be growing. The average balance on graduate student credit cards is $8,600, up 10 percent from 2003, according to Nellie Mae. The older the graduate student, the more likely he or she is to carry higher levels of debt. Students said they used their credit cards for textbooks, school supplies, and tuition.

Student loan debt is growing. The average student loan debt for those graduating from a four-year public college's bachelor's program in the 2003-2004 school year was $15,500, according to the College Board. That's up from $8,800 in the 1992-1993 school year, as measured in constant 2003 dollars. "It's all about student loans—it's not about credit cards," says Eric Weil, managing partner at Student Monitor.

But Robert Manning, author of Credit Card Nation , says that many students, particularly at public universities, use student loan money to pay down their credit card balances, which could partly explain the lower level of credit card debt.