News & Events
Professor Creola Johnson Offers Tips for Limiting Debt Over the Holiday
Paper entitled "Maxed Out College Students: A Call to Limit Credit Card Solicitations on College Campuses" reports on her research
November 23, 2005
As the 2005 holiday shopping season and black Friday approach, many Americans will accrue vast amounts of credit card debt, particularly with the anticipated high heating costs this year.
Creola Johnson, an associate professor at The Ohio State University Moritz College of Law, has conducted research, which she reported in the paper, "Maxed Out College Students: A Call to Limit Credit Card Solicitations on College Campuses," that shows college students are particularly at risk, and that America's universities and credit card companies are complicit in a system that aggressively markets credit cards to students. She also offers strategies for avoiding overspending on credit cards this holiday season.
Johnson conducted a survey of Ohio State students and found that the majority were not aware that a damaged credit history could have long-term consequences, including denial of employment. Moreover, 21 percent of the students would consider harmful options in the face of uncontrollable debt, including substance abuse and suicide.
In support of her proposal that lawmakers should enact a consumer protection statute aimed at protecting college students, Johnson recounts the sad story about an 18-year-old freshman who, distraught over mounting debt and an inability to pay her bills, hanged herself in her dorm room at the University of Central Oklahoma . "Mitzi Pool had spread out on her bed, her checkbook and the bills for three credit cards she had maxed out to $2,500."
In addition to students' coping poorly with credit card debt, Johnson's research shows that students are not using credit cards wisely (i.e., they are using credit cards to buy luxuries). The study looks at how universities have responded to the dramatic increase in marketing to students and finds that while some have banned credit card solicitations on campus and taken other measures, most universities are not doing enough to teach students responsible credit usage or to protect them from overly-aggressive marketing.
A growing number of universities maintain lucrative exclusivity contracts with credit card companies. For example, the University of Tennessee has a contract with First USA to pay the school $16.5 million over seven years in exchange for the names and addresses of alumni, associates and students. Some universities even receive royalties based in part on the level of credit card debt carried by their students.
Johnson continued, "University administrators and lawmakers must provide the kind of education that enables students to make financially wise decisions and protect their credit history - the asset or liability that will follow them the rest of their lives."
Johnson concludes that legislators should ban credit card marketers from offering free merchandise and limit their on-campus solicitation practices, and that universities should institute programs to educate their students on responsible credit card usage and payment practices.
Johnson's Tips for Avoiding Overspending on Credit Cards During the Holidays:
- Make a list of all the people you believe you MUST buy a gift for.
- Determine how much credit is available on ONE credit card.
- Set a gift spending amount that does not exceed your available credit and an amount that you can realistically pay off within four months. It doesn't make sense to charge all those "great bargains" if you will still be paying the credit card bill for them by the next holiday season.
- Stick to the list when shopping online or in the stores.
- Save your receipts so that you can return any unwanted purchases.
- Resist the urge to use your credit card for those after-Christmas sales. If you see something your really want, consider exchanging it for a gift purchased from the same store.
Creola Johnson, J.D., teaches bankruptcy law, consumer law, business reorganizations, and legal writing and analysis at The Ohio State University Moritz College of Law. Her research focuses on predatory lending. Her paper on credit card solicitations on college campuses was originally published in the NYU Journal of Legislation and Public Policy.