College or university life is often the first chance at financial independence for many students, who must carefully learn how to manage their money while attending classes. At the same time, some students begin making plans for the future after school by taking any opportunities to build their credit scores.
This is primarily done using a credit card, usually with a low balance granted by a bank or credit agency. But according to Credit Canada Debt Solutions, a nonprofit credit counselling agency, more and more students are failing the test of financial independence by overusing their credit cards.
Canadian Press Business Reporter Ross Marowits investigated how the counselling agency measured credit card activity across Canada. The data shows that in 2013, there were 76 million credit cards active across the country, which the banking association says is more than double the number of cards used in 1999.
Credit Canada Debt Solutions went further with their analysis to analyze credit card balances of students in Canada. In the early 2000s, students typically built credit with one credit card with monthly balances averaging between $1,200 and $1,300. As of last year, many students used more than one card with unpaid monthly balances approaching $3,000.
Laurie Campbell is CEO of Credit Canada Debt Solutions, who says too many students fall into the trap of spending without thinking about paying it off.
“There are so many first times that this is just another piece of ammunition for them to get themselves in trouble.”
Campbell encourages students to ask their parents about credit cards, and also advises parents to initiate conversations with their children about personal financial management. She also says if students do find themselves in trouble, they should speak with financial planners or credit counsellors to craft a plan to properly manage money.