Imagine never having to carry cash. Imagine having the ability to buy $350 worth of clothes when the balance on your checkbook reads only $245 and getting a free T-shirt besides.
Sound too good to pass up? Just sign your name on the dotted line and your new credit card may already be in the mail.
This scenario is not too far from reality. Roper College Track, a research division of market-research agency Roper Starch Worldwide, estimates that 2.6 million college students at four-year universities in the United States have one or more credit cards.
College of Liberal Arts freshman Jeff Krautkramer has signed up for three credit cards to receive free gifts. “I sign up for the free T-shirts,” said Krautkramer, who cuts up the cards when he receives them.
But some people warn against applying for too much plastic. Suzy Wheeler, of Consumer Credit Counseling Service of Minnesota, said just signing up for credit cards can be dangerous. “It can be negative to have a lot of open lines in your credit because credit lenders may look at that as potential debt,” Wheeler said.
Wheeler, educational coordinator of the nonprofit counseling service, said credit card companies solicit students so they can establish loyalty and a customer base among young cardholders. Wheeler spends a third of her time providing economic service education in area high schools because companies are marketing to high school kids. She said it is not uncommon for department stores to offer cards to high school students who have a parent co-sign for the card.
Michelle Stefanisko, a counselor at the University’s Counseling and Consulting Services, said amassing credit-card debt is a common learning experience for students. But Stefanisko also said student debt trends are getting worse.
“Credit card companies are being more aggressive,” she said, referring to card companies soliciting new cardholders.
Marketing companies set up tables in or in front of student unions, and applications can be found in every bookstore bag. But companies must gain sponsorship from student organizations in order to solicit on campus.
Credit card marketing companies offer a fund-raising outlet for student organizations. At the University the practice is governed under the Regent’s Policy on Business Enterprises. The policy states the venture must be “complementary to the academic environment.”
In a memorandum regarding the policy, Director of Student Activities June Nobbe wrote that “locations for vendors sponsored by student organizations are restricted to Coffman Memorial Union and the St. Paul Student Center.” However, tables have been found on Church Street, in Willey Hall and outside of Williamson Hall.
Student groups such as the College Republicans, the Progressive Student Organization and Habitat for Humanity sponsor credit card sign-ups because they are a major source of the groups’ income. None of these groups receive student service fees. But even groups such as the Minnesota Student Association, which will receive $194,000 in student service fees for the 1996-97 school year, use credit card sign-ups to raise additional funds.
Organizations that sponsor credit card sign-ups are paid by the person. American Credit Cards Inc. operations department member Earnie Holtrey said the company, which visits about 25 campuses per week, pays sponsors 50 cents for each application that is filled out properly. Sponsors can also earn a $100 bonus depending on the level of participation from its members.
Companies such as American Credit Cards are main outlets for students to receive credit cards, but companies work only in accordance with banks and do not participate in the processing, financing or collection of credit card debt fees.
Credit companies also recruit students through flyers placed in bookbags. University Bookstores do not fall under the Regent’s business enterprise policy and buy bags pre-stuffed with fliers — including credit card offers — so they can get a lower price for them.
University Bookstores director Robert Crabb said manufacturers have been asked to exclude certain advertisements from the University’s bags. For example, advertisements for MCI Telecommunications were removed after U Cards were introduced because MCI competes with American Telephone & Telegraph Co, a U Card sponsor.
With all these options, it’s not hard to understand how some students can get in over their heads with credit card bills.
One financial warning sign the Consumer Credit Counseling Service notes is using credit cards to pay other bills. Extension students can use credit cards to pay for their classes, but day school students cannot. Mary Kaye Butler, director of the Office of the Bursar, said students are allowed to use credit cards to pay for extension classes because extension is self-supporting, while day school is partly subsidized by the state.
The service charge by the banks “is horrendous when you add up the dollars for taking credit cards” to pay tuition, Butler added.
The Student Emergency Loan Fund does not issue loans to pay off credit card debts. “We have so little money we have to restrict our loans to situations where a student’s ability to function in school is directly affected,” said Michele Dailey, administrator of the emergency loan fund.