Gibson: Credit companies crunch consumers

Many students sign up for a credit or debit card when they start college to make purchases more convenient, but these tempting plastic cards carry inherent dangers.

Before returning to Geneseo this semester, I too signed up for a credit card of my own. I decided that since I was going to be employed on campus this year, I would do well to open a bank account and start building a credit score.

At the bank, I was amazed to hear that I had been instantly approved for a credit card with a $3,500 credit limit. I couldn't begin to imagine what any college student would need a $3,500 credit limit for, considering that very few of us would have the kind of money to pay off a bill of that size.

And yes, it is extremely important to pay off credit card debt. Holding a balance on a credit card diminishes your credit score, and makes it harder to secure potential loans in the future, such as car loans, student loans or even a mortgage.

If this isn't incentive enough, college students are hit with incredibly high interest rates; because they lack credit history, they are therefore subject to some of the highest interest rates in the country.

When my credit card arrived in the mail, I had to call my bank to activate it. On the phone, I was told my card was activated and the operator informed me that I had a zero percent interest rate for purchases on it.

Highly skeptical of this, I asked how long this interest rate would last. I was told that I had zero percent interest for three months, after which my rate would go up to 24 percent. The operator then went on to tell me about various rewards and bonuses I would get for using my credit card.

Let's review: I received a credit card with an enormous credit limit, a temporary zero percent interest rate that would skyrocket after three months and incentives to use my credit card in the form of a rewards program. Clearly, banks are attempting to get students locked into the downward spiral of credit card debt before they even graduate college.

Debit cards may seem safer, but also have their risks. The dangers of debit cards come in the form of overdraft fees. If you unknowingly run out of money on your debit account and make a purchase, your card will not refuse the transaction, or even warn you.

Instead, you will get a negative balance on your account, partly from the purchase and partly from an overdraft fee. Banks typically have a static overdraft fee that will charge you the same amount for the overdraft, no matter how small the purchase. It is entirely possible to find yourself hit with a fee of $30 or more for buying a coffee on Main Street.

Spend wisely, Geneseo.