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Paid toll entices students to get on the road to debt
Credit card promotions not as free as they appear
By Melissa Campbell
Those who are drawn to free stuff offered by credit card companies, beware. It comes with a price if you are approved.
Last week, Qdoba gave away free burritos. And back in September, Dominoes handed out free medium one-topping pizzas. Except that they weren’t really free.
To receive both, a credit card application had to be filled out.
The promoters, who sit out in tents outside the restaurants, have the look of hungry vultures, preying on poor college students. They are colloquial and personable so that even the most reluctant student is lured in.
“By signing up, you’re under no obligation. If you are approved, the company will send you a letter at which time you decide if you want the card or not” they say in some variation or another.
With their locations and marketing — college campuses, concerts, festivals — it’s clear that they are targeting college students. Why?
We are already in debt, with no immediate relief in sight. We are responsible for tuition bills, housing or rent, books, various supplies, travel expenses and food, not to mention the various other things we like to buy like clothes, music and entertainment.
Students are profitable consumers and tend to stay loyal to their first card. That means if you sign up for a Chase Visa tomorrow, 10 years from now, you are likely to still have and use that card. If the student cannot pay, companies can count on parents to come to the rescue to save their child’s young and impressionable credit score (a score between 400 and 800 that creditors look at to determine if you qualify for credit cards and loans).
According to the Education Research Institute, two-thirds of college students have one credit card, and one in five has four or more. Twenty-four percent of these credit card holders applied through campus representatives or advertisements.
While credit cards set up shop at restaurants near college campus to trap potential customers, some come right to the campus. Often, a credit card company will come to a student organization on campus and say, for every application you get, we will donate a set amount of dollars, a great way for a group with minimal funding to raise funds.
This blatant targeting of young people has many worried. Critics argue that representatives do not effectively inform students of credit terms, available interest rates and other penalties associated with having a credit card.
As a way to both study and monitor credit cards on college campuses, between 1999 and 2001, 24 states (not including Wisconsin) enacted legislation to study the effects of credit cards on students and limit solicitation at higher education institutions.
Credit cards cost many undergraduate students a bundle. The average undergraduate student, according to leading loan provider Nellie Mae, has $2,200 in credit card debt.
Because most credit cards used by students have high interest rates, the longer the balance remains, the more it becomes. Add this to student loans, and upon graduation, the average student has $20,000 in debt. This debt can follow a student into his or her 30s and 40s.
Those who are drawn to free stuff offered by credit card companies, beware. It comes with a price if you are approved. For repeat offenders, frequent credit card inquiries can hurt credit scores.
That shiny piece of plastic you receive in the mail and allows you to buy whatever your little heart desires is still your money.
Who knows, that $5 burrito I got for free could end up costing me thousands years from now — a $2,000 meal. Good thing it was one hell of a burrito.
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