Majoring in credit-card debt

American Express would not comment specifically on Woodworth's situation. Kim Forde, a spokeswoman, says the company "has a number of sophisticated risk management tools in place to manage credit prudently. The specific criteria are proprietary, but there are number of factors that we consider in our underwriting process before granting anyone credit. In terms of students in general, students eligible for approval are 18, and can typically show the means for paying the bill. But it's not a one-size-fits-all [approach]."

Unlike many other card companies, American Express does not market to college students on campus, a measure of restraint that has drawn kudos from consumer activists. However, the company does market to college kids online and has a special student card that it bills as "one of the best-looking cards on campus" and "in a class by itself." That is the card that Woodworth obtained.

Another unusual characteristic in the relationship between students and credit-card companies is that students are particularly susceptible to the complex fees and charges such companies employ. The practices attract plenty of criticism because few cardholders, in college or not, can understand them easily. For example, in a September, 2006, report, the Government Accountability Office said that bank disclosures "were too complicated for many consumers to understand. The required disclosures were poorly organized, burying important information in text or scattering information about a single topic in numerous places."

Vulnerable to "universal default"
Less well-known is that banks often change the rates they charge cardholders as their credit scores change. Students' credit scores can plunge particularly quickly, with one or two missed payments, because their track records are so short. One common practice is called "universal default." Under universal default, a student who has two credit cards and faithfully makes timely payments on one, but misses a payment on the other, can find that the interest rate he's being charged has been raised to 30% on both cards. At Senate hearings in April, several of the leading credit-card issuers pledged to eliminate universal default. But according to a 2007 Consumer Action survey, 8 of the 10 leading credit-card issuers still raise cardholders' interest rates based on information from credit reports.

All of this is disclosed in cardholder policies. But students, like many other people, don't read the fine print. "I had no idea that my interest rate would rise the way that it did because I missed one payment," says Woodworth. The average credit-card contract can be 30 pages long, and it's littered with legal jargon in tiny type. "You tell me how any college student can understand the terms of a card, and make rational choices when the agreements themselves are unreadable," says Elizabeth Warren, a law professor at Harvard University. "It's like selling toasters and handing a consumer wiring diagrams."

When Woodworth first applied for his American Express card, not having a job meant that money was scarce. His meals out consisted largely of trips to the student dining hall and the occasional late-night pizza. As he made the 71-mile trip between his home in Ellensburg and the school's campus in Moses Lake, he just hoped his bank account wouldn't empty before his gas tank. The Amex card was a blessing, at least at first. "I was really surprised that I could get a card," he says.

Using plastic to buy gas and food
The credit card helped him connect his wants and his means. Instead of scrounging quarters from the couch cushions, he could charge his meals to the card. "It's not like I was buying a 50-inch television," he says. "It was just basic things, and it was easier not to deal with cash." As Woodworth's balances grew, he kept on telling himself that he would pay it off when he got a better job, or managed to squirrel away some cash.

Like Woodworth, many college students have no fear about credit cards to temper their spending. They tend to be optimistic about the future, anticipating that once they get out of school they'll have a good job and plenty of money. Credit-card ads often echo this optimism with some showing students smiling into the distance as if glimpsing the blissful days ahead.

Students also live in a culture of debt. Many of them are borrowing tens of thousands of dollars to go to school, tapping low-interest loans to pay tuition. "The primary way we help students pay for college is by telling them to take on more and more student loan debt," says Tamara Draut, director of the Economic Opportunity Program at Demos. The message is clear, she says: "Debt is O.K., and you are going to have lots of it." In that context, Woodworth and other students think little of charging another $50 for dinner or groceries.

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