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College Student Credit Cards

Fall – time for leaves to turn and college students to pack into their new university dorms. Nothing could be better, right? Credit card companies are luring behind those piles of leaves, waiting for students to abscond the watchful eyes of their parents and fall into the credit card trap. How does it happen and how can students, parents and universities as well as online colleges keep the college student credit card trap from continuing?

Getting the Data
It may surprise you that most colleges have some sort of partnership or sponsorship with credit card companies. In exchange for the banks money, the school gives them the names and addresses of their students. Students then receive special offers that are “just for you.”

Is it legal for colleges to sell students’ data? Absolutely. If it wasn’t, do you think the University of Florida, with a student body of about 50,000, would allow Chase to set up a virtual shopping center for college student credit cards at their athletic games? Texas A&M, Arizona State, University of Minnesota, University of Texas at Austin and Ohio State, are just a few of the universities that allow credit card companies access to their more than 40,000 students’ information.

A Foot in the Door
Besides offers by mail, the banks have another, more abrupt way to get the wide-eyed young adults to sign up for their very own college student credit card. Some schools allow representatives to set up shop around campus on particular days and offer free gifts to give their sales pitch. The fastest way to a student is through their stomach, so many offer free sub-sandwiches or pizza to anyone willing to listen.

When food doesn’t work, they might start hawking school supplies or, even worse, admission tickets to the local bar students tend to gather at. Others offer rewards cards so students can earn money towards their favorite retail outlet or a much-deserved vacation. All so students will take their credit card.

By the Numbers
University and colleges agree to keep their campus closed to all banks other than their sponsoring bank; Bank of America owns most of these college contracts. For their access, banks are willing to pay lots of money to the institution for access to thousands of young adults and alumni alike. Some colleges have reported more than $2.5 million in one year from a single credit card company.

Students foot the bill by signing up for special “college student credit card” deals that often aren’t deals at all. They charge a few books, something to dress up their dorm room and maybe a pair of designer jeans. That was so easy they start to charge meals, more clothes and a night out on the town.

Think this can’t happen to your kid? Three out of four college students had a credit card in 2004. The average balance on these cards was over $2100. Nearly 40% had four or more cards.

The banks tell the young adults that college student credit cards are harmless and offer zero percent interest to them. Most students are too overwhelmed with homework, the maze of campus facilities and making new friends to read the fine print. That zero percent will skyrocket to 18 percent or more should they miss one payment. And after six months, it’ll pop up to 18 percent or more, regardless.

Credit card companies have done their homework. They know that college students are likely to earn considerably more over their lifetime than those that don’t attend higher education institutions. Even if a student can’t pay now, they will be able to pay eventually, interest and all.

College students are also more likely to stick with the bank they received their first credit card through even if a better deal comes along. For many students, receiving their first credit card is even a bigger event than their first kiss and they desperately want to hold onto that. The credit card issuer is often the first “real” business to take a chance on them, to give them some semblance of responsibility on their word. Besides, parents can always bail them out, right?

Changes in the Trends
Some universities and colleges have heard the cries of over-indebted students and their parents and begun to curb access of credit card companies offering special credit cards for students.

Many states, like New York and California, have forbidden credit card companies to sign up students on their campus. The banks are permitted to hand out information, though. Some banks have found that this isn’t disadvantageous, though, since they can have a dozen representatives handing out information around campus and set up just one table, often yards off of college property, with pizza and applications.

Tips for Wise Use

1.) Besides “don’t get one”, there are a few things students and parents can do to help prevent falling into a pit of debt.

2.) Use a debit card instead of credit. Once the money is gone, it’s gone. No fees, no interest.

3.) Read the fine print before you sign anything. A few years ago, a Discover representative told students to fill out the application and in a few weeks they’d receive their credit card and the terms (interest rate, fees, etc.)

4.) Never, ever sign up for a student credit card without knowing what the terms are. Take the pizza and run.