The clock is ticking and some believe credit card companies are in an all-out blitz. They're trying to get your college-aged kids hooked up with some plastic. And as ABC2 News Joce Sterman reports, companies are running out of time, so they're racing to sign-up fresh faces on campus.
A free pizza, an iPod or a T-shirt from your favorite team. They're just small gifts, but for some college students they could be the start of big problems. Windsor Mill’s Tierra Veney explains, "It pulls you in but you don't know the consequences behind it."
For Veney, it all started with a free box of pizza in her freshman year of college. Five years later, she's got $4,000 in debt on the credit card she got in exchange for that meal. She tells ABC2, "It's just an easy target for college students. You're straight out of high school and you don't know any better. It's free."
It's a common and legal practice you'll find on campuses across the country, as companies use their relationships with colleges to recruit new card holders. And credit card reform advocates believe the push to sign up more students will be even stronger this semester because it's the last chance for credit card companies. Pamela Banks, the policy counsel for Consumers Union, says, "That means no more free t-shirts, no more free meals. It's going to change the lay of the land."
And that change can be credited to new credit card regulations that go into effect in February of 2010. But the ban on freebies is just the beginning. Credit card companies will also have to turn away anyone under 21 unless they have a co-signer or can prove they can afford to cover the bill. And colleges will have to disclose the contracts they have with the companies. Right now, they can keep that information to themselves. Banks says, “That will be shedding the light, if you will, on what schools offer credit cards that may also be getting a kick back."
Those kickbacks, according to the Consumers Union, can be big money. They say colleges and universities get it for giving credit card companies not just access to the names of students but also a place to recruit them. But they're not welcome everywhere. Several states, including Maryland, have already banned credit card freebies from campus and made it clear their students' information is not for sale. Banks believes, "It's a situation where the school or college becomes a predator."
But the American Bankers Association is quick to downplay, saying so-called affinity cards are aimed at Alumni. Their representative points to a recent Student Monitor study that found only five percent of co-eds actually got their cards from on or off campus displays or events.
Still, many students in general are carrying plastic and spending big. A Sallie Mae study says half of all college students have four or more credit cards. Their research shows college students are also carrying higher balances and that seniors are graduating with an average of more than $4,100 in debt.
Tierra Veney knows how those seniors feel. She financed part of her education using plastic, but she has regrets about putting the expense on a credit card. She says, "It's not worth it. It's not worth it at all. If I could take it back, I would because I didn't know what I was doing."
The Consumers Union wants to make sure students like Tierra, and their parents, know what it takes to ace Credit Card 101. That’s why they're pushing awareness about credit cards and the new with a “Credit Card Care Package” they’re handing out.
The group is advising students to skip the freebies and shop around before they sign on for a credit card. They say you need to read contracts carefully to find the lowest fees and a low fixed APR, not just a teaser rate to get you on the hook. The Consumers Union also advises telling your kids not to co-sign for their friends.
It’s advice Tierra wishes she heard years ago. She says she’s learned a lesson and says students should think twice about trading free pizza for credit card they may not understand how to use. But some companies do make education a priority. Bank of America, the largest provider of students cards, says credit cards given to students have different terms and a strong educational component.
Meanwhile, defenders of affinity programs say they give universities an opportunity to find additional income to offset the rising cost of higher education. As for the regulations, the American Bankers Association says, “We understand that Congress felt the need to develop added protections for this market segment, but studies (like the Student Monitor study) indicate that young adults have relatively low account balances on average and handle their debts better than the general adult population. The new provisions will make it harder for responsible adults to get credit cards.”
