Why even bother fiddling around with credit?  We all know by now that students are terrible debt managers.  So why even get them a credit card?  Prepaid debt cards are much safer and still provide some of the benefits of spending on credit.  

Here’s why getting a student a credit card is a good idea:

1. It introduces the student to the world of credit cards and bill payment.  
2. It establishes a credit history, which will help the student get loans later in life (if he or she responsibly pays off the card). 

A prepaid debit card can achieve the same thing, without the danger of driving a student too deep in debt.  If a student racks up a quick $1000 on a credit card bill, you can be pretty certain that the issuer will raise the student’s credit limit.  The issuer wants the student to spend, spend, spend.  

A prepaid debit card, on the other hand, has a cap.  You deposit a set number of funds on the card.  So if there’s $500 on the card, the student will have to effectively budget to make sure that she does not spend too big a chunk of that deposit at any one time.  If the student needs more money, she’ll have to ask, rather than just spend on credit with no sense of accountability.  

A prepaid debit card really makes the most sense for younger borrowers.  They’ll be more effective debt managers, while still building up a credit history.  Their credit rating is bound to improve because they’ll never be mired in too much debt.  Instead, debt will stay at a reasonable level, ensuring that a credit rating will never tank.  

There’s an article on the front page talking about how small businesses are struggling because it’s harder right now to secure a small business loan.  Though the article mainly focuses on loan availability, it does mention one other very important detail: the affect this has on the job market.  

As the article states, small and medium-sized businesses make up 50 percent of the overall job market.  For those students recently graduating, this comprises a majority of the jobs they are likely to get.  So while small businesses are 50 percent of the job market overall, a disproportionate number of these jobs will go to younger employees.  

Put two and two together and you’ve got a bad job market for those college grads now entering the job market.  What can you do?  Not much.  Let me put that a different way – there are things you can do, but you just have to accept the fact  you’re graduating during tough economic times.  Even when things are going smoothly, it can be difficult to lock down a job with a good starting salary.  In this climate it’s even harder.  Those are just the facts.  

So what can you do?  Realizing it’s tough is step in the right direction.  You’ll be less prone to frustration – realize that every new college grad is in the same boat.  You also have to be more flexible.  You’re probably not going to find your dream job right off.  You might not even find a job in your basic area of expertise or chosen career path.  

In a worse case scenario, you might need to get a retail job, while interning for no pay at a dream job company – anything to pad the resume to make it easier to apply for a job in the future.  Studying for an additional degree in that time is not a bad idea as well.  No, you didn’t work for your degree to get a job in retail, but those are the circumstances as they are today.  Even if you’re graduating in 2008, the credit crisis is projected to come to an end in 2009, so you can bide time earning a paycheck however you can until the job market becomes a little more favorable.  

I’d like to write a little bit more about something that was written about on the front page at EoC a couple of days ago.  Apparently, consumer rights groups are up in arms about Facebook credit card ads that are targeting the college demographic.  Given that college students spend more time online than they do in the commons – or wherever a credit card company might be setting up shop on campus – this is no small development.  

I’ve written before about how college administrations are selling students’ personal info (phone number, address, email address) to credit card marketers.  While the Facebook thing isn’t the fault of a college administration, it’s still part of the same fabric, and same problem.  Credit card companies are advertising to college students knowing full well that younger borrowers do not readily understand the terms of credit and can get very easily into debt trouble.  

Another way of saying that: students are a creditor’s dream.  One of the major misconceptions that students make is that they think credit card companies don’t want you to go into debt.  They want you to go into debt – and how.  They’re main concern is that you don’t default.  They even want you to pay the minimum because this means that you’ll be in debt for longer.  Anything that extends the amount of interest is good news.  Sounds pretty simple, but this is one of the many facets of credit card agreements that new cardholders may not understand.  

So credit card companies target young people with inaccurate, or downright deceitful, promises about credit – such as only having to make low monthly payments.  As I just mentioned, low monthly payments means higher interest.  So while it’s literally true that a student may only have to pay a little every month, this is actually against their best interests.  On Facebook, credit card companies are not accurately portraying the interest rate on a particular card.  Basically, it’s a case of false advertising – but laws governing the web haven’t quite caught up to print or TV ads.  

Another complaint about the Facebook ads is that they tout payday loans for college students.  These loans have a worse interest rate than even a cash advance on a credit card – which is really saying something.  But the ads are so enticing: “Get $1000 today!”  Yes, but you’ve got to pay it back in two weeks or else interest rates could go up even further.  Students just don’t think that far ahead.  My advice to anyone who sees these ads: don’t click em and do some comparison shopping on your own, like via our credit card directory, to get a better credit card deal for your credit rating and income bracket.  

Here’s an interesting piece , which focuses on college grad’s now graduating and what they’ll have to face as they enter the real world.  Issues like negotiating a starting salary and finding a job with health insurance come up – both very important topics.  But then I got to this sentence: “Even though graduates are just getting started in the work world, now is the time to start thinking about retirement.”

It made me pause, and even laugh a little to myself because it is so incredibly unrealistic.  There’s no way you could ask a 22-year-old to start saving for a time when they’re 65 and above.  Then again, the article goes on and talks about how today’s college grads may not be able to rely on social security.  40-50 years from now and the social security system may have all but collapsed.  At the very least, it is going to be in a very different form.  Adding to this, the kids of Boomers now graduating comprise a huge generation that is going to put a huge strain on a system that it already showing signs of weakness.  

So after I scoffed at the prospect of a person in their twenties responsibly saving for retirement, I reflected on what a different climate today’s college grads are facing.  Not to get too doom and gloom, but there are a lot of issues on the horizon: the weakening dollar, global warming, a possible depression.  Just the sheer mention of such things – that they’re even a possibility – should make college students take their financial futures very seriously.  

This isn’t the nineties anymore – the slacker generation.  Back then, you could get away with just getting by.  There’s no nice way to put this, but things are much tougher today.  As a response, today’s college grads need to be tough.  If saving for retirement seems a little far-fetched, at least saving in general is a good idea – for an emergency fund or even to buy a house, because that’s the thing that’s going to come before retirement.  Budgeting, keeping out of debt, and securing good employment may be more important for the younger generation today than any generation in the past.  

Or should that be: Moron College Credit Card Marketing.  A recent study of college students showed that 4 out of 5 undergrads agreed that credit card companies should lay off marketing on college campuses.  Basically, this is seen as a way of saving students from themselves.  Says one student, ““There are so many discounts available for credit cards — free $25 at Amazon, Discover cash back, Macy’s 10 percent discounts. If it weren’t for all these bargains I would have never signed up.”

Argh, $25?  Really?  That’s enough to make you want to sign up for a credit card that is likely going to cost you hundreds of dollars in interest?  I’ve never quite understood people’s willingness to sign up for a credit card just based on a promotional offer.  A number of rewards cards claim, “Get $50 cash back after your first purchase!”  These tactics must be successful or they wouldn’t be as prevalent as they are.  These offers aren’t just for student credit cards but general rewards cards as well.  

It just doesn’t make sense to sign up for a credit card for such a small payoff.  What you should really be looking at is the APR and fees, not some small-fry freebie upfront that you’ll quickly spend.  

No doubt it’s students who are the most susceptible to offers such as this. For a while I advocated that colleges should provide financial seminars on campus or just that students should know better about spending wildly on credit.  Now, I’m not so sure.  If a college student is so easily duped into signing up for a credit card by the promise of a $25 gift card, that same student is likely going to spend unwisely on credit.  So maybe college students really do need to be saved from themselves and college credit card marketing needs to be stopped entirely.  Don’t even give college students the option to sign up for a card because clearly students can’t help themselves.