Easy prey: Credit companies target students
Mar 27, 2008, 09:53
Mike Jeffries -- for The Muleskinner
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| Credit companies are many times prey on students during college years. (Photo illustration by Holly Wright) |
The groceries are simple and might last two weeks, if she rations well. She pulls out a loaf of bread, a pair of off-brand peanut butter and jelly jars and a box of KIX cereal.
“My best friend had to buy it all for me,” she said, looking toward the ceiling in an attempt to delay a flurry of emotion.
She can’t help but blush, and the inevitable tears begin to flow easily from the corners of her eyes. She’s fraught, but mostly embarrassed.
It’s not easy to talk about such things.
You see, Catie, a UCM senior, has troubles – 7,000 of them.
Each one sits on a credit card. Since last summer, Anna has swiped up $7,000 on four credit cards – three Mastercards and one Visa. Each is maxed out. Each is overdue. And each is calling every day. She hasn’t made a payment in three months.
She, like millions of Americans and thousands of college students, has become a slave to debt.
“It’s all I think about,” she said. “When I go to sleep, when I wake up, when I go to class. More than anything else, it’s affected my overall wellness.
“I never thought I’d end up here.”
Catie is the first to admit burden. The sharks came looking for a meal and she scurried out to sea. But she’s not alone.
Cards for Dead People
Robert Manning, author of “Credit Card Nation,” estimates that seven to 10 percent of college students will drop out early because of credit problems.
“I think students drop out for a number of reasons,” said Matt Melvin, assistant provost for enrollment management. “I think debt, without a doubt, directly or indirectly affects student performance.”
The trouble is that college students are easy targets. They often don’t have much disposable income and credit cards provide a way to live comfortably.
Buy now, pay later.
Dave Ramsey, a nationally syndicated radio host and author of two books on personal finance, told the Muleskinner that college students are the No. 1 target of credit card companies.
“People are more attached to their first credit card,” Ramsey said. “It’s the card they think signaled their passage into adulthood. But having a credit card does not make you an adult. The credit card companies send cards to dead people and dogs.”
These companies are not being discreet when it comes to targeting an increasingly younger demographic. Recently, Mattel toy company introduced a line of Barbie doll accessories that included an actual-size toy credit card. Children pretend to go shopping, then pay for the bundle by swiping the card against the plastic register. A charming “credit approved” affirmation blurts from a tiny speaker in the toy.
And credit card companies are making it “fun” for college students, too. Each of the major companies – Visa, Mastercard, Discover and American Express – market student cards. In exchange for putting tuition and books on its card, the company offers its customers cash or gift rewards.
“College students are naďve when it comes to credit cards,” Ramsey said. “They think the company is giving them free money in exchange for a free T-shirt. First, you tell yourself it’s for emergencies only; then it’s ‘just for this one pizza,’ and the next thing you know, you’re over your head in debt.
“If you play with snakes, you will be bitten.”
Paying Easier, Buying More
The bites are becoming more common as the world progressively bows toward the altar of debt. Visa sells itself with commercials that make people who pay for products in cash seem incompetent and old-fashioned. The ads feature a Broadway-like production in a store or restaurant, where customers come and go in brilliant fashion because they use Visa to make paying easy. When a customer tries paying in cash, the ebb and flow of easy paying is broken.
But, according to a study by Dunn and Bradstreet, those credit cards are doing more than making it convenient at the check-out line. The study showed that consumers who pay with credit cards are spending 12 to 18 percent more than if they used cash.
Ramsey said that McDonald’s found its average transaction amount rose from $4.50 to $7 after the fast-food empire began accepting plastic as payment. Professors at MIT found that in some cases, consumers spent 100 percent more with credit cards than they would have with cash.
UCM is doing what little it can to keep students away from following the bright lights of credit card debt. An unwritten policy keeps credit card companies from setting up booths on campus. It’s a far stretch from where the University was in the late 90’s, when students were obligated to sit through a credit card presentation before receiving their University ID cards.
A free student finance counseling center also recently opened on campus. Students in Free Enterprise (SIFE), in the Ward Edwards building, provides students with one-on-one financial advice.
“The number one reason people have come into our office is because of debt,” said Chelsea Miller, vice president of SIFE.
Miller said the number of people who have declared bankruptcy between the ages of 18 to 24, has risen 96 percent in the last 10 years.
“There are a lot of tricks that credit card companies use to get to college students,” Miller said. “There are posters hanging all around this university that offer $50 for using their credit card. People don’t think about all the fees and interest rates. They just think about that instant $50. We are trying to educate students.”
Educate, Educate, Educate
Still, few universities and high schools make personal finance courses a high priority.
“Parents should teach their kids about sex, drugs and credit cards before they leave home,” Ramsey said. “Unfortunately, a lot of kids get to college without knowing how money works – and definitely how debt works.”
Melvin said part of the problem is the ease.
So, is it the job of the University to teach financial literacy?
“Our general education courses are designed to teach our students to be well-rounded,” Melvin said. “I think teaching financial literacy is a great idea. I think it’s just as important as Composition I or College Algebra. The problem is, something has to get cut to squeeze something in.”
The debt students are building up during their college careers isn’t just making life more difficult while in school. A 2006 report by CBS News found many college students postpone life events because of debt. The survey found 44 percent of people repaying college debts delay buying a home, 28 percent delay having children and 18 percent delay getting married.
For Catie, getting out of debt seems nearly impossible. Her total credit card bill each month equals about $560. She doesn’t even open the envelopes anymore, she knows there’s no way she can pay.
“I really don’t want to declare bankruptcy because I don’t want my credit score to be damaged even more,” she said.
Ramsey offers simple solutions for students in debt trouble.
“The first thing is to cut up the credit cards,” he said. “Have a plasectomy, a plastic surgery. Get a part-time job. A lot of people have worked while they were in college, so it can be done. Do a budget and cut way back on your lifestyle. Put every dime you can find toward debt. Knock it out as soon as you can.
“[Being in debt is] a terrible way to start life on your own. Now is the time to start forming good money habits like doing a written budget and living on less than you make.”
