A joint venture between First USA Bank and the Minnesota Alumni Association has resulted in a credit card designed with University graduates in mind, but the number of student owners is growing.
Credit card use among students is controversial. Financial aid officers say a growing number of graduates are leaving college with ruined credit ratings because of credit card abuse. The card’s advertisement implies to offer benefits to support the student lifestyle and to help the University. The application says, contrary to some opinion, the card is the “smartest way to support your school … and your lifestyle.”
Barbara Tornow, the executive director of financial aid at Boston University, played an instrumental role in persuading her alma mater, Hobart and Smith Colleges, not to offer a credit card.
“I think we need to have more responsibility for warning students about getting in over their head,” said Tornow in an interview with the New York Times.
“The University of Minnesota is not sponsoring a credit card,” said Bob Hicks, director of leasing and athletic properties at the University. The alumni association, in conjunction with First USA Bank, is extending an already active card, he said.
In April 1994, First USA Bank approached the alumni association, said Matt Ledwith, assistant vice-president of Affinity Marketing for First USA Bank. The card is intended to be used by alumni, however, approximately 12 percent of the cardholders are students.
As students graduate, the percentage fluctuates with students becoming alumni, Ledwith said. Anyone interested in obtaining the card can get one, said Hicks, who added that alumnus status is not needed.
Students are not directly targeted to apply for the card, but tangential marketing — such as exposure on the campus or at student events –is used.
The primary target for the card is alumni, said Margaret Carlson, executive director of the alumni association. “We don’t direct the cards specifically to students,” said Ledwith.
But students are receiving advertisements for the card. “The application was sent to my dorm room last year,” said Renee Anderson, a sophomore in the College of Liberal Arts. Anderson said she decided she wanted the card because of the big University ‘M’ on the front.
Anderson, a journalism major, said she would guess, as a student, the company wants her to have it. She is not a member of the alumni association and has another VISA card. However, she said, “This is a really expensive card compared to my others.”
The card offers a fixed annual percentage rate of 17.9 percent after the introductory period.
During the week of the Spring Jam at the University, a booth on the Coffman Memorial Union mall promoted the card.
“Students are the target for this card,” said a University student working at the booth who wished to remain anonymous.
Sophomore Laura DeMink said, “How can (the target audience) not be students if they’re coming to campus?”
After completing a student application, students received a free T-shirt. The application informs students of the benefits of the card, including two sentences explaining why this specific card is better than any other.
“You can call it what you want,” said DeMink. “I think that all promotion is active.” There’s no way to sell a product by being passive, she added.
Ledwith, who worked with the alumni association to set up the account, said, “We are passive in marketing to students.” They have less of a presence and are very careful about how we market to students, he added.
This passivity avoids in-your-face advertisement. However, in haste to receive a T-shirt, students might overlook the small print. First USA Bank asks for authorization to check past credit and employment history and to report to other credit companies their experience with the credit card holder.
The Nov. 10, 1996, New York Times article reports that college officials say that for too many students, the certainty of owing large debts after graduation is combining with the banks’ marketing of credit cards to them to provoke another response — spend now, worry later.
The banks’ awareness of this attitude is key in their monetary gain. Every time the card is used, whether by a student or alumnus, the company makes a profit. The percentage of sales the company makes from this card is confidential and proprietary, said Ledwith.
The alumni association also makes revenue from use of this specific card. The amount of this revenue is also confidential, Ledwith said.
Carlson said, “The revenues go toward general operating funds of the alumni association.”
The application to obtain the card states that the card helps the University. A portion of the money earned from card use is allocated toward enhancing the student experience, Carlson said. This enhancement includes residence hall mentor programs, assistance with new student programs, help with the student resource center, setting up student awards and scholarships and other student events.