College Students Still Face Crippling Credit Card Rates

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Credit card lenders around the country are beginning to salivate as college students head to campus -- though not as enthusiastically as they once did. Young adults used to be a powerful debt-generating machine, and banks took full advantage. Then the CARD Act of 2009 made many of the old practices that lenders used to lure and keep college students in debt illegal. However, even with those changes, college student credit cards carry some of the highest annual percentage rates in the country, rivaling those of store credit cards.

The CARD Act Didn't Eliminate the Problem

Pre-CARD Act, college students could simply sign up for a card at age 18. Now, individuals younger than 21 cannot be offered pre-approved credit cards. They must have proof of income or a co-signer older than 21. But these restrictions don't make it hard for the average college kid to obtain plastic.

Post-CARD Act, credit card companies were largely banned from their old tricks of handing out free T-shirts, pens, tote bags or Frisbees to entice naive students. Instead of offering tangible goods, lenders moved to using rewards to lure college students to spend, spend, spend their way into owing money at cripplingly high annual percentage rates.

Analyzing the APR of Student-Targeted Credits Cards

A college student handling his or her first credit card is likely to pay an average annual percentage rate of 21.4 percent, according to a study of the top 50 U.S. banks by (where I work).

This is not much lower than the average retail credit card APR of 23.23 percent, which was noted as some of the highest in the country, according to a recent survey from

Bank of America (BAC) offers the lowest possible APR on a no rewards college student card, starting at 10.99 percent, but with a high of 20.99 percent. Its cash and travel rewards cards start at 12.99 and 14.99 percent, going up to 22.99 percent.

Cards like Citi's (C) ThankYou Preferred Card for College Students offers 2,500 bonus ThankYou points after spending $500 within the first three months of owning the card. The card also features double ThankYou Points on purchases for dining at restaurants and on entertainment. With a 23.99 percent APR, this card could easily lead college students into overspending to rack up 2,500 points for a measly $25 gift card to Chili's (EAT).

Many college students don't enter university with an established credit score. Lenders see someone with a lack of established credit history as a higher risk, so lenders are likely to be applying the highest APR to those students' credit cards.

Cost of Not Paying off a Card with a High APR

The guiding rule of a credit card is to only spend on the card what you can afford to pay off, on time and in full each month. Banks want to trick you into being a borrower and spending more than you can afford.

Unfortunately, many consumers -– college students or not –- fail to follow the pay-in-full rule and end up paying only the minimum due on the card each month.

This mistake is costly. A student who charges $1,000 on a credit card with a 21.4 percent APR and only pays the minimum due will end up paying a lender $1,941 for the privilege of borrowing a grand. It will also take 7.6 years to pay off the debt, according to a calculation by

So, Why Should a College Student Have a Credit Card?

Responsible college students can use the four years in school to develop their credit score. Unless they can afford to make it through their entire lives without renting an apartment, getting a mortgage or taking out any loans, credit history will play an important role in their financial lives.

Using a single credit card in college, keeping the utilization ratio low and paying the bill off on time and in full each month can help a young adult achieve a healthy credit score before even tossing his or her cap at graduation.

The caveat: irresponsible young adults who easily fall into impulsive indulgences need to avoid the temptation of a credit card.

Oops, I Already Have Credit Card Debt

Paying the crushing APR on credit card debt can keep consumers in the red for years as their payments primarily go toward paying off interest instead of the principal. The process of digging out of debt can be expensive and time-consuming, but reducing the interest rate on debt can save consumers both time and money.

Balance transfers offer the opportunity to slash interest rates down to zero percent, which often makes the fee worth the cost.

Personal loans won't offer a zero percent interest rate, but they provide less complexity than credit cards with fixed payments at a set interest rate. Some lenders are even evaluating education instead of focusing solely on the traditional credit score. offers a simple tool to evaluate how much consumers can save by paying off credit card debt faster with balance transfers or a personal loan.

Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She is the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the brand and content manager for MagnifyMoney.

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Tom Harrell

I'm just kinda Wondering.
They all seem to be learning about Business and Psychololgy and Philosophy and Political Science and a lot of STUFF like That, but they ain't being taught SQUAT about LIFE and what happens when the Party is Over.
They ALL would be Wise to Study "BANKRUPTCY LAW" then they'll All be sure to have JOBS when they Graduate.

August 25 2014 at 9:38 PM Report abuse rate up rate down Reply
1 reply to Tom Harrell's comment

Tom Harrell

I'm just kinda Wondering.

Whatever it is, they sure are charging a lot for it.

August 25 2014 at 10:39 PM Report abuse rate up rate down Reply
In My Theory-Opinion

It ruins the dating process, cannot buy a convertible as a 2nd car, or a home then?

They were foolish in college and have lifetime to pay off debts.

Colleges and Universities are foolish to pay their president and boardmembers millions?

I took 2 year community college in Manufacture Technology. Owe them nothing at graduation.

I have a Cadillac and a 2005 Mustang Premire V-6 convertible. Aty college graduation night I flew over my college campus at midnight after late dinner at Denny's with my grandparents and family members, got my private pilots license on pay as I go process till I stared getting credit cards during my 9 year flying adventure taking 435 passengers up.

Of course I bankrupted twice (From Aviation).

Now budget better. No longer fly but love my mustang convertible and my Lord Jesus Christ even more.

August 25 2014 at 7:05 PM Report abuse rate up rate down Reply
Carol and Dave

when is congress ging to rein in the exorbitant credit card fees of 20% plus while we can only recieve paltry saving account interest. I do not owe them anything , but people can not control their spending and get in trouble. Why are the students not being more" conservative" ha!

August 25 2014 at 4:49 PM Report abuse rate up rate down Reply
1 reply to Carol and Dave's comment

No big deal...... just take out another student loan to pay them off.

August 25 2014 at 7:52 PM Report abuse rate up rate down Reply
local news

If these students are in college they should know how to figure what the costs are. When I was 17 and I bought my 1st car I knew how to figure the interest rate on the money I was borrowing which at the time wasw 3%.

August 25 2014 at 3:21 PM Report abuse rate up rate down Reply

We are graduating college students that can't manage their personal finances?

August 25 2014 at 3:19 PM Report abuse rate up rate down Reply
1 reply to Emily's comment

We are graduating students who have been cultivated into the entitlement mentality. Why work when socialism is right around the corner!

August 25 2014 at 7:53 PM Report abuse rate up rate down Reply

You can thank your republican congress for this one......... They have control of the purse strings.

August 25 2014 at 3:13 PM Report abuse rate up rate down Reply
2 replies to toosmart4u's comment

Whose purse strings?????? I guess we could borrow another 1 or 2 Trillion a year.

August 25 2014 at 7:54 PM Report abuse rate up rate down Reply

Thanks for the completely unrelated opinion, 2dumb.

August 25 2014 at 10:41 PM Report abuse rate up rate down Reply

Nobody should have to pay 20%+. If they are that high risk, the application should not be approved--legalized loansharking is all this is.

August 25 2014 at 2:14 PM Report abuse rate up rate down Reply
1 reply to robwill57's comment

And get harrassed for prejudicial actions?

August 25 2014 at 10:42 PM Report abuse rate up rate down Reply

Here's a couple of tips for college students, 1) Don't spend money you don't have, 2) pick a major that will provide you enough income to pay your debts. Sorry, gender, ethnic, sociology, and poly sci undrrachievers. You're digging a big hole, and it's all yours.

August 25 2014 at 12:13 PM Report abuse rate up rate down Reply

The reason for that is that many of them do NOT pay their bills. Fix that first.

August 25 2014 at 10:48 AM Report abuse +1 rate up rate down Reply

We should not allow these credit card companies to charge 25% APR for college students. We should be encouraging our kids to graduate from college with as little debt as possible. These students are our future. They're thieves.

August 25 2014 at 10:33 AM Report abuse -1 rate up rate down Reply