How teens get sucked into credit card debt

By MP Dunleavey

Editor's note: Columnist MP Dunleavey and six other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these "Women in Red" in Dunleavey's column on MSN Money and on her message board.

Like a lot of hard-working women, Andrea Alba has moments of financial despair.

Between juggling three jobs, paying her bills and trying to get out of debt, she feels overwhelmed. "I just want to pay everything off," she says. "I wish I didn't have to struggle so much."

But Alba is no debt-weary baby boomer. She's only 19 and a couple of years out of high school.

Her financial burdens may be heavier than other teens: She pays her own college tuition and also helps pay the rent and utilities at home.

But the sinker was signing that first credit card application before she had even graduated from high school. "It was fine at first," she says. "I used it mainly for gas. Then it just got deeper and deeper."

Within a year and a half of her 18th birthday, Alba was $2,500 in the hole -- and a card-carrying member of the newest and youngest group to spend beyond their means. Call them Teens in Red.

The slippery slope

It's no secret that many college students are quickly sucked deep into credit card debt. But now it seems the problem can start even before freshman year.

According to the JumpStart Coalition for Personal Financial Literacy, an educational organization, nearly a third of high school seniors reported having a credit card of their own or one co-signed by a parent.

Because young people under 18 technically can't apply for a credit card without a parent's co-signature, it's hard to know precisely how many teens have credit and how many are already in debt. And CardWeb.com, which monitors the credit card industry, doesn't yet track teen cardholders.

But according to surveys conducted by Robert Manning, author of "Credit Card Nation: The Consequences of America's Addiction to Credit," the number of incoming college freshmen with credit cards tripled between 1999 and 2002.

Those freshmen carry an average of $1,585 in credit card debt, reports student-loan lender Nellie Mae. Many, like Alba, started building up debt even before their adult lives began.

Soliciting teens and moms

I was shocked to learn that kids not yet old enough to drive are receiving card solicitations -- co-addressed to parents -- while they are still living at home.

Janet Bodnar, author of "Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them," is appalled that her 16-year-old son regularly gets credit card solicitations -- even if they include her name on the address. She throws them out.

"I don't think it's healthy for teenagers to have credit cards before they go to college," says Bodnar, also deputy editor of Kiplinger's Personal Finance magazine.

She disagrees that young people learn financial responsibility by using a credit card. "Most kids can't hand in a paper on time, let alone pay a bill on time," she says.

"This is funny money to them. It's not real. It's a license to spend, and they're not learning how to manage money on their own."

Teens need training

Most teens are vulnerable to debt because they lack a clear understanding of how credit works, says Laura Levine, JumpStart's executive director.

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