Need a Credit Card – Avoid the Companies Peddling on Campus
Credit card companies with excessive fees paying colleges millions for the right to access you on campus.
Over the past few weeks we have spent a great deal of time discussing the growing problem of student loan debt. Simply stated, students are borrowing far too much in the process of earning their diploma and their accumulated debt is endangering their entire future.
At the same time that loan debt is creating a heavy burden for students, another form of debt is wreaking havoc for the general public. We are talking about credit card debt, an issue for all adults including those just graduating from college.
Current data suggests that college students possess an average credit card debt of $4,100. Such a number is almost inconceivable to us, because this is not the number the highest set of borrowers owes – it is the average. With credit card interest rates for young people at astronomical levels, those accumulating such a level of debt soon find their monthly payments growing without those payments reducing their card debt.
We have long advocated that students think twice about all debt but particularly that associated with credit cards. To ensure that students don’t get in over their heads, we have advocated that they shop around and get a single card that can be used only in a true emergency. We further advise students who have charged or continue to charge any amount to pay the balance in full each and every month to avoid the exorbitant interest charges most credit card companies assess.
Clearly, that advice has been falling off deaf ears. But then again, we can easily grasp how students get snookered given how hard card companies work to get a card into your hands.
Thanks to the Credit CARD Act of 2009 it is now possible to get a full glimpse as to how much companies are willing to spend to get students onto the debt bus. Under the Act, credit card issuers had to submit some very specific data to the Federal Reserve. That data included how much money credit card companies spent in fees to universities just so that they could set up shop on college campuses. In addition the CARD Act demanded issuers release how many new accounts were opened due to these on-campus opportunities.
Consider the data that was collected. First off, credit card issuers paid more than $83 million for the right to go on campus and thus potentially sign students up for an account. That’s correct, a total of $83 million.
According to the data collected by the Federal Reserve, a total of 17 different credit card companies issued more than one thousand college card agreements. As but just one example of the 17, Chase Bank spent over $13 million to entice new student customers. This of course does not take into account the cost of each company’s employees’ time on campus recruiting new customers.
At the same time, to get a sense as to how much these credit card companies are making off of students, this $83 million enabled card companies to sign up 53,000 new student clients. This translates to an astonishing figure: these companies spent, on average, about $1,600 for each and every student just for the right to sign these new customers up.
Yes, these companies spent $1,600 just for the right to try to get a card in your hands. Anyone with a basic business understanding realizes that to make up these initial marketing costs, the cards offered have to be laced with fees and high interest rates. Otherwise, these companies would not spend such extraordinary sums of money just to get the chance to sign you up for card.
Their goal is simple – get a card into your hands and then start charging you excessive fees whenever you miss a payment or incredible interest rates when you are unable to pay off the loan balance immediately.
Don’t Get a Card on Campus
The thought of easy access to credit can be enticing but students need to understand that those card companies on campus are simply not the ones to consider. If you head over to CreditCardConnection.org you will see a list of those companies that Credit Card Connection warns consumers to avoid due to their unfair and unethical practices.
A single credit card to be used in emergency situations is a good idea. But not all cards are created equal – do your homework and find a card that has reasonable interest rates and minimal finance charges. Many credit unions offer a card that offers reasonable access to credit as well as a fair fee structure should you not be able to keep your monthly balance zeroed out.
The bottom line is that debt is a very bad thing and we are talking all forms, student loan and credit card. But the most insidious is credit card where card companies take advantage of unsuspecting students.
If you see one of those card companies on your local campus, you would do yourself a favor if you began walking in the other direction as fast as you can.