Credit Cards on Campus
Requiring Disclosure May Shield Students
William Vallely spent six hundred dollars on a T-shirt.
Vallely applied for two credit cards early in his first semester at the University of Massachusetts at Amherst, in the fall of 1998. The credit cards were being marketed to students in the entryway of the Berkshire dining hall in the Southwest residential area.
Vallely applied for a Citibank MasterCard and a Citibank Visa on separate occasions, he said. In both cases two young men at a table set up in front of the dining hall took applications in exchange for free T-shirts.
“I signed up for the T-shirts,” Vallely said. He remembered one of the T-shirts. He said it had a stylized globe on it. “I gave it to my girlfriend.”
He was approved for both cards and recieved them in the mail, Vallely said. “I only used the MasterCard and when I got the bill I sent the $200 [that I owed] in.” Vallely said that Citibank got his accounts confused. “They must have looked at my Visa account,” he said. “Citibank said I didn’t owe them any money.” Even though he disputed Citibank’s conclusion, Vallely said, the bank sent his $200 back.
“So I spent it,” Vallely said.
A couple months later Citibank sent him the MasterCard bill again, this time with late fees and interest charged at the higher rate for defaulted accounts, Vallely said. Also this time, Vallely didn’t have money to pay the bill with.
“By the time I paid it off it came to 600 something [dollars],” Vallely said.
Credit cards have caused college students problems at the University of Massachusetts. The university passively serves as a conduit for credit card promotional activities directed at students.
The credit cards marketed for students on campus are not just credit cards that happen to be being sold to students, they are distinct credit cards specifically devised for students. A review of promotional literature showed that student credit cards marketed on campus have interest rates two to four percentage points higher than regular credit cards that students can and have obtained independently.
However, college students are a lower risk than the general population of cardholders, according testimony given by a senior vice president of VISA U.S.A., Paul Allen, to a subcommittee of the House of Representatives in 1994.
According to government records, then-representative Joseph Kennedy, D-Mass., asked if this was because parents paid off the account when their children couldn’t. Allen said he did not have that data.
“It seems like a shameless exploitation,” said sophomore Stacey Kendall about the credit cards readily available to students. “They know we don’t have any money, but they give them to us anyway.”
Kendall has a regular credit card she obtained with her mother. She said she always pays off the entire balance within the grace period, before any interest is charged on it. “I use it when I know I’m going to have money,” said Kendall, “such as for buying Christmas presents. I know I’ll be working in January.”
“I know some of my friends have the GTE Visa and have trouble making payments,” sophomore Lisa Bishop said. “GTE screws them over. They have a really high finance charge, like 15 percent.” In fact, GTE Visa has a variable annual percentage rate of 11.9 over the prime rate, for a total APR of about 20.
Bishop said she has an American Express card that she applied for of her own initiative while at home, and she always pays off the balance during the grace period. “I try to stay on top of it,” she said.
Perhaps an American Express student credit card application urging students to “Max out your life” is more honest than it realizes: it depicts a young man having fun in the water, riding a shark.
Firms selling student credit cards reach their target audience through several methods that involve UMass-Amherst.
This includes direct mail and telephone solicitations. For example, if the two envolopes in every room’s mailbox contained the same thing, then the AT&T Universal Mastercard came pre-approved for every student in Dickinson dormitory this semester. GTE Visa has called every student on campus at least once, based on informal interviews. “They call me at like eight in the morning,” Kendall said.
“I don’t think there’s anything we can do about that,” Vice Chancellor for Administration and Finance Paul Page said. Director of Auxiliary Services Ashoke Ganguli said that the university isn’t monitoring credit card solicitations coming through the telephone or the mail. “They’re hard to police,” he said.
Applications for student credit cards also come with any University Store purchase in the plastic bag the item is put in.
“That’s stopping next semester,” said Sidonio Ferreira, the operations manager for the Campus Center/Student Union complex. “It’s part of the contract with the bag supplier but we’re changing the contract for next semester.”
Advertisements and applications are also plastered over bulletin boards in buildings throughout the university. In Hasbrouck Laboratory’s lower level the two bulletin boards were dominated by 11 different advertisements for student credit cards, each with a cardboard pouch stuffed full of postage-paid application forms. Eight more of these large, colorful posters duplicated ones already up.
“On bulletin boards I think they have the right [to post credit card advertisements] because of the First Amendment,” said Page. Meredith Schmidt, the acting director of Business and Facilities Services in the Campus Center complex, where there were not any credit card promotions on the bulletin boards, said she thought that bulletin board policies are up to the individual building. However, no manager or like postion could be found for Hasbrouck Laboratory, and the building itself declined to comment.
One more way that students are offered credit cards is by vendors at tables in front of university buldings; this is how Vallely got his credit cards.
This is the only technique for marketing credit cards to students for which the University has formulated a campus-wide policy.
The chancellor’s Executive Advisory Committee, the senior policy-making body at the Amherst campus, had a conversation on the subject of solicitation for credit cards earlier in the semester, Page said, because the issue has been brought up nationally.
“We decided that instead of prohibiting credit card companies on campus,” he said, “we would insure that they provide students with educational material or money for the University to provide information.”
“It’s still an issue of concern in many people’s minds and it may come up again, but as it stands today that’s the policy at a very high level,” said Page.
“I don’t know what the criteria for the educational materials are,” Page said. In the Campus Center and Student Union, credit card vendors have been required to provide educational literature separate from the application for several years, Ferreira said. How is it determined what is educational? “I decide,” said Ferreira. “Those pages of little print don’t count.”
Page said the administration of the campus policy on credit cards is at Auxiliary Services.
Ganguli, the director of Auxiliary Services, said that his concern is with student debt. “These companies try to get you hooked,” he said.
Starting this current semester, Ganguli said, “what we do with the credit card companies is say you can come but you have to bring educational material.” Ganguli shrugged and laughed. “And they backed off,” he said. “So far this semester we haven’t had any companies apply for permission to vend. So the ones that are there are illegal.” What should one do if one thinks a company is marketing credit cards illegally?
“If someone may be vending illegally, come see me,” said Ferreira. “If I see a credit card seller anywhere on campus and they don’t have permission from anyone, I kick them out.”
Maybe if the policy had been in place last year Vallely wouldn’t have gotten involved with Citibank.
After he paid off the debt he canceled both cards, Vallely said. His feelings toward both the bank and the credit card companies were: “I’m never working with you again.”
“I always pay off my accounts as soon as the bill comes. That’s why I was so mad,” Vallely said.
“The T-shirt definitely wasn’t worth $600.”
[Written for Chris Yurko’s 1999 Fall Journalism 300 class.]
[Note: I have the figures in my WordPro document; at 1999 rates of 24% APR for a defaulted card with $29 a month charge for no payment, $200 can easily reach $600 before it is paid off.]