FLM Day 24: Student spending habits

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month. Their dedication to financial literacy is truly inspiring! Today, Gail Cavanaugh founder of Students Assembled to Value Economical Money Management talks about students because it is so very important to share financial knowledge with younger generations.

While college students are responsible for thirty-three percent of the debt in the United States, The Georgetown University’s Credit Research Center reports that they are more likely to pay off their debts, tend to pay late and exceed their credit card limits. As a result, they incur more fees.

Since college students seem to be more responsible about their obligations toward debt, it would appear that they need more guidance in meeting their obligations in a timelier manner and staying within their limits. These two areas have caused students to incur more charges in the past. It could be that they do not realize the ramifications of their delinquent acts.

However, with recent credit card legislation, the students should experience some relief in the amount of penalty fees they incur. The Senate just passed an act that would limit the amount of fees the banks charge. If “the students incur more fees than any demographic group studied”, according to the Credit Research Center, then it would stand to reason that they will be the ones to benefit the most from the new legislation.

One way that students can ensure that they pay bills in a timely manner is to pay bills automatically through a checking account. Most banks offer automatic deductions where an account owner can request that payments be deducted on revolving charges of the same amount on the same day each month. If using this service, the student will have to remember to balance the check book and record the payments.

The student must review the statements regularly to avoid being charged for something which he/she did not purchase, as well as ensure that he/she deposits enough money to cover the payments. Since students are entrusting their accounts to others, automatic deductions should only be arranged with reputable companies to avoid becoming a victim of identity theft or fraud.

If the student has a credit card, fees can be automatically paid with a credit card, however, this may cause the student to incur more debt and charges, it the student does not make regular payments on them. The student will have to weigh the benefits of using the credit card to make payments. If the outstanding balance is low and payments are made regularly, then the credit card could be used to pay bill.

Another way to pay bills on time is with online banking. Richard Sherman says that “In the U.S. today, 25 percent of all households use some form of online banking and by 2010, more than 50 million U.S. households will be banking and paying bills by clicking a mouse instead of licking a stamp.”

With online banking, there is software which can help you organize your bills and pay your bills on time from your computer.


Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.