Credit Card Debt Management

With an unstable job market and increasing college costs, it’s a hard time to be a college student. It’s no wonder credit card companies’ aggressive on-campus marketing campaigns appear so enticing to students. A U.S. PIRG survey of 1,500 students at 40 colleges in 14 states revealed the following:

-2/3 of college students have at least one credit card.

-55% use their credit card for daily expenses.

-Average balance for students with no parental help = $1,301

-Average balance for senior students = $2,623

Granted, student credit card debt is nothing compared to student loan debt. However, the credit card debt certainly won’t help pay off the student loan debt or establish financial stability after college. Furthermore, experts say accepting credit that is essentially unaffordable in the college years marks the beginning of a highly damaging pattern of behavior that contributed to the recent housing crisis.

Silicon Valley’s Mercury News cited 19-year-old Holly Jackson as saying she feels overwhelmed by her credit card bills and may need to pick up a second job.

“I’m learning my lesson,” she said. “After I pay these off, I don’t plan on getting more. They’re awful.”

Undeniably, credit card companies themselves are not without fault. Their aggressive and misleading on-campus marketing campaigns have been legendary. Sen. Robert Menendez (D-NJ) recently proposed a bill that would require consumers under age 21 to “opt in” before they could be the target of credit card solicitations. Additionally, universities are stepping in to provide personal finance education. These are certainly steps in the right direction.

Citibank’s mtvU is getting a ton of attention these days, thanks in large part to a CNN report naming it one of the “best student credit cards.” Why all the love from critics? This card knows its target audience all too well. That intuitiveness is something MTV has long bragged about, and now they’re packing their knowledge of the coveted 18-26 demographic into small, power-packed plastic packages.

The card offers five Thank You points for every dollar spent at restaurants, bookstores, record stores, video rental stores and movie theaters. It also give students one point for each dollar spent elsewhere. It offers five percent back on all Amazon.com purchases and a whopping number of points for staying under limit, paying the bill on time and bringing in good grades each semester.

Although it’s refreshing to see a credit card with such an apparent level of social responsibility, mtvU has also been in the news lately for some shady recruiting tactics involving free food. So it’s apparent that they are preying pretty heavily on the college crowd, but that makes sense in light of the fact that college students are the only ones allowed to have this card. Besides, many people consider credit cards just as integral to college life as microwaveable food nowadays. So for those who subscribe to that belief, mtvU is a pretty unbelievable bet. However, before signing up, consumers may want to consider that getting approved for this card can be a fairly rigorous process.

In fact, some say Citibank has applied new verification rules to all its student services. The guidelines require a photocopy of a student ID and a current enrollment sticker, or a copy of the current semester’s paid tuition bill with the student’s social security number on it, printed out directly from the school web site with the URL listed. Also required: proof that the student has a landline phone with the bill in their name. If the bill is not in their name, then a copy of a bank statement from within the last 90 days will suffice.

For those students willing and able to jump through Citibank’s many hoops, mtvU looks to be a very good card indeed. But don’t overlook the interest rate - 0% in the first six months and thereafter a variable rate of more than 17% on purchases and balance transfers, and 22% on cash advances.

From a no-frills, low-interest perspective, students may be better off to use the other two credit cards mentioned in the CNN Money article. That is the Ohio Savings Bank Student Platinum Plus Visa or MasterCard at 13.99% APR, or the Sovereign Bank Student Visa or MasterCard at only 9.9% fixed. The catch on that last one is that the 9.9% Platinum Plus account with Sovereign Bank is granted only to those deemed to have “credit worthiness,” according to Sovereign Bank’s terms and conditions.

Those without “credit worthiness,” like entry-level college students who often don’t have any credit built up yet, will be bumped up to a higher interest credit card with Sovereign Bank. At any rate, responsible use of a low-interest, low limit credit card is the name of the game for college students, and responsible use does not mean swiping the card at every video store or restaurant you can find.

I really love this story! It seems Oklahoma State University law school students and faculty spent more than a year conducting a study of on-campus credit card solicitations aimed at students. The results landed several companies in court.

Attorney General Marc Dann’s office said Wednesday it is suing New York-based Citibank, Philadelphia-based Campus Dimensions Inc., Chicago-based Potbelly Sandwich Works LLC and local restaurant OSU La Bamba Inc. after two recent events near campus in which students allegedly were offered free food at La Bamba and Potbelly in exchange for signing up for a credit card. The lawsuits, which claim the companies violated Ohio’s Consumer Sales Practices Act, stem from the fact that the sign-up stipulation allegedly wasn’t disclosed in advertisements.

According to the story in Columbus Business First, the state is trying to stop the companies from repeating their shameless ways by:

Free food for starving college students? Really? Have they stooped that low? We knew the credit card industry was hurting, but offering free food is a new low. It is now painfully obvious how desperate they are to get consumers right out of the gate, before their credit gets tarnished.

I have experienced the hunger pains of college, the fifth day in a row of Easy Mac microwaveable macaroni and cheese. I would’ve done about anything for a nice, healthy, wholesome meal. In fact, junior year I did choose which church I would visit based on who bought lunch for college kids.

These credit card companies sense that vulnerability in college kids and they prey on it! Free food … Ugh, and to think all they ever gave me was a free t-shirt! California legislators have taken their battle against student credit card solicitations a step further. They are currently awaiting Gov. Schwarzenegger’s signature on a bill that would bar all credit card companies from using “free gifts” to entice credit card applications from college students on campus. Maybe there really is more to California than fruits and nuts. It’s brilliant and all 49 other states should follow their lead ASAP.