By David Maillie

Ever since the early 1990's credit card companies have been a huge presence at colleges all across the USA.  It doesn't matter if you attend(ed) a state school, private school or even an elite school like Harvard, Yale, Cornell, Caltech or MIT - the credit card companies are there and boy are they ever making their presence known.  From innocent looking gift boxes for incoming freshman (yes Cornell, you are guilty of this one too) with a pop tart, some coupons and free coupons and maybe even a Tshirt and the always handy credit card application to alumni mailings with school themed credit cards.  Some famous college football bowls have even been renamed for them (the Capital One bowl).  They are everywhere.  Ads all over campus, brochures included or inserted with every purchase at the campus book store.  Campus magazines, alumni magazines, flyers, sport programs, you name it they're in it.

Why is this?  Because of the huge profits these credit card companies can get from college kids and even college alumni.  Some payments to the college for allowing this access to their students and alumni can reach in excess of over 30 million dollars (per US News depending primarily on the colleges size).  Now the extra money for the college is all fine and dandy, but the cards are not a benefit to the students and manytimes (almost all of the time) the cards have some of the worst terms available - this is how and why the credit card companies are marketing them so hard.  The students and alumni could easily get credit cards with far better terms manytimes with even half the interest rate on their own just by a quick search on Google, Businessweek.com, or their local newspaper financial section.  So how are these cards of any benefit to the students and alumni other than that they have your schools name, colors or mascot on it?  They aren't.  They are just a tool to put college students and alumni into debt and get them to pay interest (very high interest) and big profits over many years. 

Now, credit cards are very handy in college to pay for expenses, books, emergencies, etc...   But one should not have a card with a starter rate of 19% or more.  The current best rates for standard (non-premium) credit cards are (keep in mind this is subject to change):

Pulaski Bank and Trust                 7.99%     1(800)980-2265
First Premier Bank                        9.90%     1(800)987-5521
Amalgamated Bank of Chicago     11.00%   1(800)723-0303

There is no need for a high interest credit card.  If you carry a high interest card and carry a balance on it you are just helping to pay the extremely excessive salaries of the bank executives (Many are well above $10 million per year and growing). 

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On top of high rates, credit card companies that are usually featured all over college campuses love to play shady or dirty games like changing terms with little or no notice.  They can and will quickly increase your interest rate to the state allowed maximum (as high as 25 - 29% in many states) if given the chance.  All it takes is for your credit rating to drop, you to miss a payment (even if you mailed it out on time USPS has a 1.5% lost, returned, stolen, or other mishap ratio which means you have a 1.5% chance of having a late payment and getting creamed with a ridiculous interest rate even if you did nothing wrong on your part).
This can quickly result in an almost 30% interest rate. 

To top it off the credit card companies love to employ dirty little tricks like shortening billing periods to 20 or 25 days instead of the old norm of 30.  This helps ensure more people will mail a payment late ensuring a higher rate and much higher profit.  You also have to read the fine print and many of these "collegiate" affinity type cards start collecting interest the moment you add a charge to it and payments always go towards the item with the lowest interest rate, not the 22% cash advance you just took out.  There are so many loopholes and hidden shenanigans that they have to manytimes shrink the terms to the point where they are unreadable without a microscope to get it all in there.  The big problem here is that most incoming college freshman have no idea of all of the costs, hidden fees, penalties and what can easily and quickly happen to them for using these cards.

So, in my opinion, if colleges are going to profit from these very expensive affinity credit cards being marketed heavily to their students then they need to take some responsibility along with the credit card companies and make financial and credit education (akin to money and credit card 101) mandatory and free.  Or atleast make it available and easily accessible to all students.  As Robert Kiyosaki and others recently stated on a investment panel on MSNBC, financial education is severely lacking and is costing people severely.  Kids are graduating from college in more debt than ever and this is not only from student loans.  There is a difference in debts and there is some good debt like mortgages as property values do increase over time, but credit cards and huge balances with high rates will quickly sap your earnings and make the American dream a faroff reality for most.  With these collegiate affinity cards colleges are literally allowing these credit card issuers and banks to prey on our nations future leaders and give everyone the falsehood that debt is normal and just a regular part of life. 

College students - please, ignore any and all credit card offers above those I listed above (check your local newspaper financials or Google for the current best rate cards as these will change over time).  There is no need for a high interest card and especially one with poor terms.  Learn how to manage money and your finances.  Stay out of debt and instead of paying interest learn how to get your money and earnings to earn and work for you, not the bank or credit card company.  Over time if you save enough money there will come a time when your money, if properly managed (like in a low fee index fund), can and will make more money for you than you yourself can make.  And this is where the American dream becomes realized.  You no longer have to work to pay the bills.  Your money that you've wisely saved and put away does this.  The time to start saving and stop spending stupidly is now.  Keeping up with the Joneses may be cool for now, but when your'e 45 and you are flat broke with a big house, nice cars and virtually little or no net worth you will wish you had cut back a little and put your money to working for you.

Two great books that teach proper financial education and money management that colleges should be required to give out with all those spammy credit card offers:

The Automatic Millionaire by David Bach

The Millionaire Next Door by Thomas Stanley and William Danko

These books tell you how to stop paying interest and your hard earned money to the credit card companies and how to put it to work for you.  They expose the reality behind the term big hat, no cattle - many people may drive fancy and expensive cars and live in big homes, but the reality is many are only 1 paycheck away from financial disaster.  Wouldn't it be better to have enough put away that you could lose your job (or just quit) and be fine for years without having to change your lifestyle?  It's very possible for everyone.  We need to make sure kids get a good financial footing and that they don't start off debt laden with terrible high interest credit card debt.  We are a nation swelling in debt where the average person now has over $10,000 in credit card debt (and many have over $50,000 - just imagine the interest they are paying on this) and this must change.  Thank you for reading this article and I hope you put these ideas and tips to good use.  Stay out of debt and learn to put your money to work for you (see our article on Exchange Traded Funds (ETF's) for more on this).  Avoid high interest credit cards, use the internet and financial sections of your local newspaper to find better deals.  Get financially educated.  If you liked this article please link back to us so that others may benefit from this and other helpful articles on this site as you have.


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