~ Credit Card Survey of USC Students ~ Results from Spring 2002

~ Credit Card Survey of USC Students ~ Results from Spring 2002 The Credit Card Survey of USC Students was administered during the Spring 2002 semester to collect information about 1) students use of credit cards, 2) credit card practices that may put students at risk, 3) characteristics of students who are most at risk, and 4) student input concerning the possible development of a credit card solicitation policy. The following report provides the results of the study. Descriptive Statistics: Who completed the survey? Students completing the survey (n = 392) most closely represent traditional college age students: 80% were 22 or younger; 94% were full-time students; 93% were single; and 48% lived on campus. The distribution among academic classifications indicated 20% freshmen, 20% sophomores, 23% juniors, 27% seniors, and 11% graduate students. Female Male Gender Frequency Percent 3.8 243 62.0 146 37.2 More females completed the survey than in the actual population, with 62% in the sample and 55% actually enrolled in Spring 2002. The breakdown by ethnicity indicates more African-Americans completed the survey and fewer Caucasians than in the actual student body. All other ethnic groups are closely representative. 22 or younger 23-29 yrs 30-39 yrs 40 or older Age 312 79.6 57 14.5 17 4.3 6 1.5 Ethnic Background African-American Asian-American Caucasian Hispanic Other Classification Frequency Percent 4 1.0 95 24.2 11 2.8 261 66.6 14 3.6 7 1.8 Full-time Part-time Enrollment Status 5 1.3 370 94.4 17 4.3 Freshman Sophmore Junior Senior Graduate Student 3.8 77 19.6 77 19.6 90 23.0 104 26.5 41 10.5 Marital Status Residence Single Married 1.3 365 93.1 26 6.6 On-campus housing Off-campus With parents 188 48.0 153 39.0 51 13.0

Financial Resources: Student Employment, Financial Aid, and Financial Independence Fifty-three percent (53%) of the students surveyed reported that they work part-time and an additional 11% reported working full time. Seventy-five percent (75%) indicated that they received financial aid. For those students with financial aid, 68% received student loans, 57% received scholarships, 40% received grants, and 21% received work-study d Employment Status Employment Status t employed Work full-time Work full-time Work part-time t employed 42 10.7 208 53.1 142 36.2 Work part-time Financial Aid Financial Aid Fin. Aid Receives Fin. Aid Fin. Aid 1.3 295 75.3 96 24.5 Receives Fin. Aid Only Students Receiving Financial Aid Included Student Loans Student Loans Grants Scholarships Work-study Other Count % Count % 99 32.0% 210 68.0% 186 60.2% 123 39.8% 134 43.4% 175 56.6% 244 79.0% 65 21.0% 289 93.5% 20 6.5% Scholarships Grants Work-Study Other 0 10 20 30 40 50 60 70 80 2

Continued: Financial Resources: Student Employment, Financial Aid, and Financial Independence Students were asked to rate their level of financial independence on the scale below, where 1=Financially Dependent on Parents and 5=Financially Independent (100% self-supporting). To enhance the flexibility of the data, this variable was coded as both a quantitative variable and a categorical variable. Thus, the analysis includes both proportions and means. 1 2 3 4 5 Financially Dependent 50% Dependent Financially Independent On Parents On Parents (100% self-supporting) Fifty-three percent (53%) of the students reported that they were 50% or more financially dependent on parents. Only 16% reported being 100% dependent and another 16% reported they were 75% dependent on parents. Approximately ¼ of the students indicated they were 25% dependent, and 22% reported financially independent (100% self- supporting). As one would anticipate, the level of financial independence for undergraduates is lowest for the freshman year and increases through each consecutive academic classification. Mean Financial Independence 5.0 4.0 3.0 2.0 1.0 Freshman Sophmore Junior Senior Graduate Student Level of Financial Independence from Parents 100% dependent on parents 75% dependent on parents 50% dependent on parents 25% dependent on parents Financially independent Level of Financial Independence Cumulative Percent 5 1.3 1.3 61 15.6 16.8 61 15.6 32.4 82 20.9 53.3 95 24.2 77.6 88 22.4 100.0 100% Independent 25% Dependent 100% Dependent 75% Dependent 50% Dependent 3

Credit Cards & USC Students: Uses, Payments, and Balances In responding to items concerning credit cards, students were asked to consider only those cards in the student s own name. Additionally, they were asked to include only credit cards like Visa, MasterCard, Discover, etc. and not to include debit cards, check cards, department store cards or gas cards. Seventy-two percent (72%) of the students reported having at least one credit card in their own name. Have Credit Card(s) in Own Name Have Credit Card(s) in Own Name 281 71.7 111 28.3 Students with a Credit Card in their Own Name Monthly Average Balance Of the 72% of students reporting they had a credit card in their own name, 38% had only 1 credit card, followed by 34% who had 2, and 16% who had 3. Eleven percent (11%) reported having 4 or more cards. $0 $1-$500 $501-$1000 When responding to the item: What is the total average monthly balance of your credit card(s), most students (51%) reported a total average balance of $1-$500. Twenty percent (20%) reported an average balance of $501-$1000, and an additional 16% reported a balance of $1001-$3000. $1001-$3000 More than $3000 Don't know 0 10 Percent 20 30 40 50 60 Monthly Average Balance 1 2 3 4 5 or more Number of Credit Cards Cumulative Percent 106 37.7 37.7 95 33.8 71.5 44 15.7 87.2 16 5.7 92.9 16 5.7 98.6 4 1.4 100.0 281 100.0 $0 $1-$500 $501-$1000 $1001-$3000 More than $3000 Don't know Cumulative Percent 1.4.4 17 6.0 6.4 142 50.5 56.9 57 20.3 77.2 44 15.7 92.9 12 4.3 97.2 8 2.8 100.0 281 100.0 4

Continued: Credit Cards & USC Students: Uses, Payments, and Balances Do some groups of USC students have credit card(s) at a higher rate than others? For the group of students reporting they had at least one credit card in their name: 64% of those 22 years or younger had credit card(s) compared to 85% of those 23-29 years had card(s); there was only a 2 percentage point difference between males (70%) and females (68%); 44% of the freshmen had card(s), 65% of the sophomores, 75% of the juniors, and 79% of the seniors; the largest increase (21 percentage pts.) in credit card holders occurs during the sophomore year; African-American students and Caucasian students have credit card(s) at approximately the same rate (66%); a larger proportion of part-time students (94%) have cards than full-time students (67.2%); off campus students (79%) have card(s) at a greater rate than on-campus students (61%); students who work full-time or part-time have credit card(s) at a higher rate (73%) than students who do not work (60%). Are there differences in payment practices? For all students with credit card(s), 20% make the minimum monthly payment, 51% pay more than the minimum but less than the full payment, and 29% pay the full balance. Fifty percent (50%) reported knowing their associated finance charges without looking, and 50% did not know. The following comparisons look at some similarities and differences among student populations: almost 20% of the students 22 years or younger and the students 23-29 year of age report making only the minimum monthly payment; 31% of the students 22 years or younger pay the full monthly balance compared to 18% of those 23-29 years; the most popular payment practice across age groups is paying more than the minimum but less than the full; males and females have similar payment preferences; about 20% make the minimum payment, 50% make more than the minimum, and close to 30% pay the balance in full. the pattern of 20% making minimum payment, 50% making the minimum-plus payment and 30% making the full payment holds true across academic classifications except for the sophomore year, where 46% make the full-balance payment; this overall 20%/50%/30% pattern is different for comparisons by ethnicity, where African-American students reported a 31%/54%/15% pattern; the average monthly balances for African-American and Caucasian students are very close with approximately 77% of both groups keeping an average monthly balance of $1000 or less. What do USC students pay for by credit card(s)? The following observations are based on the table below: 70% of the students reported never using a credit card for tuition and academic fees, while close to 12% reported using it frequently or on a regular basis; 25% of the students reported using their credit card(s) on a regular basis for textbooks and travel; 17% to 18% of students with credit card(s) reported regular use of credit card(s) for school supplies, groceries and entertainment. Never Emergencies Only Frequently Regular Basis # % # % # % # % # % Tuition & Academic Fees 196 69.8% 51 18.1% 17 6.0% 16 5.7% 1 0.4% University Housing & Meals 230 81.9% 26 9.3% 14 5.0% 9 3.2% 2 0.7% Textbooks 74 26.3% 70 24.9% 64 22.8% 71 25.3% 2 0.7% School Supplies 93 33.1% 62 22.1% 77 27.4% 47 16.7% 2 0.7% Groceries 91 32.4% 80 28.5% 64 22.8% 45 16.0% 1 0.4% Entertainment 76 27.0% 53 18.9% 99 35.2% 51 18.1% 2 0.7% Travel 59 21.0% 69 24.6% 81 28.8% 71 25.3% 1 0.4% 5

Student Access to Credit Cards One of the primary purposes of this study was to gather student input and experiences concerning credit card access and credit card offering on campus. According to the students completing this survey, 57% of those with cards had a credit card(s) in their own name before coming to USC. These students also reported that only 30% obtained a credit card(s) through campus solicitation. Concerning student opinion about on-campus credit card offerings, 41% of all students completing the survey indicated they supported no credit card solicitation. This was the most popular category. However, 50% prefer 1 card or a limited number on campus. Only 4% selected many companies. There seems to be a balance between students wanting no on-campus credit card solicitation and those wanting some. Had Credit Card prior to USC Had Credit Card prior to USC 1.4 119 42.3 161 57.3 281 100.0 Obtained Card(s) On-campus Obtained Card(s) On-campus 1.4 195 69.4 85 30.2 281 100.0 Opinion on Credit Cards Opinion on Campus Solicitation Prefer no companies on campus Prefer 1 USC endorsed company Prefer limited number on campus Prefer many companies on campus 26 6.3 171 41.1 102 24.5 100 24.0 17 4.1 416 100.0 Many companies Limited number 1 USC endorsed Mis si ng companies 6

A Serious Consideration: Withdrawing because of Outstanding Debt Considered Withdrawal Due to Debt Withdrawal Due to Debt 361 92.1 31 7.9 Is there a link between excessive credit card use and student persistence? Two basic questions in examining college students and credit cards are: Does excessive debt lead to withdrawal from college? and If so, are there certain student characteristics or behaviors that can serve as warning signs of debt leading to withdrawal? In this study, 8% of the students indicated they had seriously considered withdrawing from USC because of outstanding debt. Nine percent (9%) of the students with credit cards and 5% of the students without credit cards reported they had seriously considered withdrawing because of excessive debt. Fortunately, these percentages are low. Yet, application of this ratio to the general population shows that approximately 80 students per 1,000 students may be seriously considering withdrawal due to debt. Isolating characteristics of students or their behaviors that may be related to serious consideration of withdrawal from college can be helpful in establishing early warning programs, educational materials, and campus practices. The following statements are based on items that were linked by statistical significance to students seriously considering withdrawal due to debt. Students with an average monthly balance exceeding $1,000 are more likely to consider withdrawing. Students making the minimum monthly payment are twice as likely to consider withdrawing as students paying more than the minimum or the full balance. Of these 2 early warning signs (an average balance exceeding $1,000 and making only minimum payments) the $1,000+ balance has a stronger correlation (Phi =.363) to considering withdrawal than the minimum payment predictor (Phi =.280). A 3 rd warning sign to consider is having a 3 rd credit card. Moving from 2 cards to 3 cards makes a student more than twice as likely to have a balance over $1,000, the strongest predictor. The strongest signs that a student may be or may start considering withdrawal due to excessive debt are (in order of strength of association) 1) a balance over $1000; 2) making minimum payments; and 3) moving from 2 credit cards to 3 cards. These three variables account for 21% of the variance among students not considering withdrawal and those who are. 7

Who are our students at risk? To further understand which students are more at risk at USC, each student in the data set who had 2 of the 3 warning signs ($1,000+ balance, minimum payment, 3 or more cards) or 3 of the 3 warning signs were identified. Of 392 students, only 2 had all 3 warning signs (.5%); 10% had 2 of the 3 warning signs. Of the students with credit cards, 86% did not have 2 or the 3 warning signs and 14% did have at least 2 of the 3 warning signs. The differences between students at risk based on age, marital status, gender, campus residence, employment status, and whether or not a student received financial aid were very minimal and are attributable to sample variation. ne of these differences were statistically significant. The only statistically significant difference (p =.05) for having 2 of the 3 risk factors was based on ethnicity. Because of the low number for Asian-American (n=11) and Hispanic (n=11) students, only African- Americans and Caucasians were included in the inferential analysis. Caucasian students at USC are more likely to have 2 of the 3 high risk factors than African-American students. For this sample, only 4% of the African-American students had 2 of the 3 factors compared to 12% of the Caucasian students. (p =.05) 120 Ethnic Background * Have 2 of 3 High Risk Factors Crosstabulation 110 100 African-American Caucasian Count % within Ethnic Background Count % within Ethnic Background Count % within Ethnic Background Have 2 of 3 High Risk Factors Don't have 2 Have 2 of of 3 Risk 3 Risk Factors Factors 91 4 95 95.8% 4.2% 100.0% 230 31 261 88.1% 11.9% 100.0% 321 35 356 90.2% 9.8% 100.0% Percent 90 80 70 60 50 40 30 20 10 0 Don't have 2 of 3 Have 2 or 3 Have 2 of 3 High Risk Factors Ethnic Background African-American Caucasian Pearson Chi-Square Continuity Correction a Likelihood Ratio Fisher's Exact Test N of Valid Cases Chi-Square Tests Asymp. Sig. Value df (2-sided) 4.618 b 1.032 3.794 1.051 5.385 1.020 356 a. Computed only for a 2x2 table Exact Sig. (2-sided) Exact Sig. (1-sided).042.020 b. 0 cells (.0%) have expected count less than 5. The minimum expected count is 9.34. minal by minal N of Valid Cases Symmetric Measures Phi Cramer's V a. t assuming the null hypothesis. Value Approx. Sig..114.032.114.032 356 b. Using the asymptotic standard error assuming the null hypothesis. 8

Summary and Recommendations The Credit Card Survey of USC Students was administered in Spring 2002, with approximately 400 students completing the survey. The following summarizes the results by each of the 4 goals of this research project. Goal 1: Information about Students Use of Credit Cards 72% of the students completing this survey reported having at least 1 credit card in their own name. 51% of those with credit cards reported having an average monthly balance of $500 or less, with an additional 20% reporting an average monthly balance of $501-$1,000. As students age and academic levels increased, they became more financially independent; they had more credit cards and their debt was higher. For undergraduates, this change was most apparent for sophomores and juniors. Few students (6%) use a credit card to pay for tuition or academic fees. Students reported using credit cards on a regular basis for textbooks (25%) and travel (25%). Students reported using credit cards frequently for entertainment (35%), travel (29%), school supplies (27%), textbooks (an additional 23%) and groceries (23%). Goal 2: Information about Credit Card Practices that may put Students at Risk Students with an average monthly balance exceeding $1,000 are more likely to consider withdrawing from USC because of excessive debt. Students making only the minimum monthly payment are twice as likely to consider withdrawing due to debt as students making a payment of more than the minimum or paying the full balance. The 3 rd warning sign, moving from 2 cards to 3 cards, makes a student more than twice as likely to have a balance over $1,000 (the strongest warning sign). These 3 variables ($1000+ balance, minimum payment, 3+ cards) account for 21% of the variance among students considering withdrawing and those who are not considering withdrawing due to debt. For students with credit cards, 86% did not have 2 of the 3 warning signs and 14% did have 2 of the 3 signs. Goal 3: Characteristics of Students who are Most at Risk statistically significant differences in having 2 of the 3 high risk factors were found based on age, marital status, gender, campus residence, employment status or whether or not a student received financial aid. The only statistically significant difference in having high risk factors occurred based on ethnicity: 6% of the African-American students had 2 of the 3 high risk factors compared to 12% of the Caucasian students. Goal 4: Student Input concerning the Possible Development of a Credit Card Solicitation Policy 57% of those students with credit cards had them before coming to USC. Of the students with credit cards, 30% had obtained a card through on-campus solicitation. 41% of the students preferred having no credit card companies on campus and 50% preferred 1 USC endorsed company or a limited number of companies. Conclusions Students at USC are very similar to students nationally, except that USC students tend to be a bit more conservative in credit card use and responsible in payment practices. The only statistically significant difference for having high risk factors for withdrawing due to debt occurred among African-American and Caucasian students, with Caucasians more likely to have 2 or the 3 factors than their African-American peers. Another thematic difference indicated that sophomores and juniors were becoming more financially independent and using credit cards more. A clear preference among students concerning a policy regarding on-campus credit card solicitation did not emerge. Recommendations Recommendations based on this study include: 1) increase awareness programs for all academic levels and all ethnic groups, especially among sophomore and junior level students and Caucasian students; 2) explore financial aid options for students who are paying for textbooks with credit cards on a frequent or regular basis; 3) share findings of this study (especially the 3 warning signs) with University 101 instructors, upper-level students who serve as peer leaders, student organizations, their advisors, and campus administrators considering policy development. Office of Research, Grants & Planning Division of Student & Alumni Services University of South Carolina 803-777-4172 or melm@gwm.sc.edu 12/02/2002 9