WASHINGTON
- September 17 - Students who obtain credit cards at on-campus tables carry larger
balances and pay off their cards later than those who do not, according to the results of
a nationwide survey of college students released today by the U.S. Public Interest
Research Group (PIRG). The group issued a new fact sheet for college students and also
called on colleges to regulate credit card marketing on campus and do a better job of
educating students about credit card debt.
"Students, especially those who fill out credit card applications at campus tables in
return for trinkets and candy, run the risk of falling into the campus credit card
trap," said Ed Mierzwinski, U.S. PIRG Consumer Program Director. "Students,
often without jobs and often facing large student loan and other school debts, should be
careful not to make things worse by running up unnecessary, high-cost credit card debt,
since they risk ruining their credit records if they fail to pay on time."
"Meanwhile, the credit card industry has poured millions of dollars into a campaign
to get Congress to make it easier for them to collect unpaid credit card debts from the
bankrupt victims of their high-pressure marketing of high-interest credit cards,”
Mierzwinski added. "Instead of approving the special interest, so- called bankruptcy
reform bill on the Senate floor, the Congress should impose tough sanctions on misleading
and deceptive credit card marketing."
“To avoid becoming the next victims of the industry’s sleazy marketing of
over-priced cards, students who desire credit cards should obtain them when they can
afford them and should get them based on the best interest rate terms," added
Mierzwinski, "They shouldn't apply for a credit card just to obtain a frisbee or
free-bee or bottle of soda at a campus table."
Among the national results of "The Campus Credit Card Trap," a spring 1998
survey of 1260 undergraduate students at 15 campuses were the following:
STUDENTS WHO HAD OBTAINED CARDS AT CAMPUS TABLES HAD MORE CARDS AND HIGHER BALANCES THAN
THOSE WHO HAD NOT.
- Students responsible for their own cards who obtained cards
at campus tables had more cards (2.6) than those who had not (2.1) and had higher unpaid
balances ($1039) than those who had not ($854).
- More students responsible for their own cards who obtained
cards at campus tables reported carrying unpaid balances (42%) than those who had not
(35%).
- Those students responsible for their own cards who had
obtained cards at campus tables and carried balances had higher unpaid balances ($1460)
than those who had not ($1206).
CREDIT CARD MARKETING ON CAMPUS:
- Students reported obtaining gifts ranging from T-shirts and
Frisbees to coffee mugs, slinkees, and candy or bottles of soda in return for filling out
applications at tables. According to students, campus groups sponsoring the tables often
receive either flat fees or per-application payments from the credit card companies as
well.
- More than half of students (61%) responsible for their own
bills reported they had obtained cards at campus tables while fewer than half of those who
reported that their parents helped with payments (41%) obtained cards at tables.
MOST STUDENTS ARE RESPONSIBLE FOR THEIR OWN CARDS
- Most students surveyed (69%) obtained credit cards in their
own names, while the others (31%) said that their parents either paid their primary credit
card bills or co-signed at least one of their cards. Of those who obtained cards in their
own names, only 15% reported holding a full-time job when they applied.
- Thirty-eight percent (38%) of the students responsible for
their own cards report paying their balance off each month. Thirty-six percent (36%) pay
“as much as they can.” However, the remaining students responsible for their own
bills -- more than a quarter of the total -- report that they pay either the minimum only
(16%) or pay late (9%).
- Overall, students responsible for their own cards had
average unpaid balances of $968; however, students who reported carrying over a balance
had unpaid balances of $1,366.
CREDIT CARD EDUCATION INADEQUATE
- Only 41% of all students found credit card education
materials "helpful" or "somewhat helpful." Over one-quarter of
students (26%) found introductory "teaser rates" misleading.
- When asked how long it would take to pay off a $1,000 credit
card debt at an 18% Annual Percentage Rate (APR) and only making the minimum required
payment of 3%, only 20% of all students guessed the correct answer, six years.
- While 79% of all students reported using credit cards for
multiple purposes, from campus expenses to shopping, only 13% reported limiting credit
card use to emergencies.
According to figures from the Department of Education, the
amount of money borrowed by students increased by 11% last year, totaling over $38
billion. PIRG's Higher Education Project estimates that with continued increases in
student borrowing, the average student borrower entering school this year will graduate
with approximately $20,000 of student debt.
"With credit card debt stacked on top of student loan debt, these results should be
alarming for students, parents and educators." said Ivan Frishberg, Director of
PIRG's Higher Education Project.
The PIRG report called on colleges to regulate campus credit card marketing and do a
better job of educating students about credit card and other debts. Among PIRG's
recommendations were the following:
- Colleges should prohibit credit card companies from offering
trinkets to students for filling out applications unless the student has first read a
credit card education brochure prepared by either the college or a non-profit credit
education organization.
- Colleges should include credit card and debt education
materials in brochures inserted in bookstore shopping bags. Credit card and debt education
and counseling sessions should be made a regular part of campus programming, including new
student orientation programs.
- Colleges should review and consider limiting the total
number of credit card tables allowed on campus each semester.
Along with the report, PIRG released a new fact sheet for
college students, with tips on avoiding the credit card trap. Among the fact sheet's
recommendations to students:
- Study the benefits and risks of credit card debt before you
apply. If you decide you need a card and can handle it responsibly, then consider the
following:
- One national credit card is all you need to help you build a
credit record, if you pay it off on time. You can build a credit record without carrying
an unpaid balance.
- If you must carry a balance, always pay as much as you can
afford, every month. Never pay only the minimum balance, or you'll have trouble paying
down the card.
PIRG also urged Congress to enact legislation, such as HR
1975 (Joe Kennedy-D-MA) to rein in unfair credit card marketing practices. However, PIRG
condemned bankruptcy legislation, S. 1301, proposed by Mastercard and Visa, that is under
consideration on the Senate floor this week. An even more one-sided companion bill has
already passed the House.
"Responsible use of credit cards can help college students build a credit record that
will help them get car loans and mortgages after they graduate," concluded
Mierzwinski. "But it is up to students to protect themselves from unwise credit card
debts, because no one else will."
PIRG student volunteers asked students with credit cards to fill out surveys in student
centers in the spring of 1998 at a representative sample of 15 college campuses
nationally, including large and small, public and private, 4-year residential and 2-year
community colleges.
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U.S. PIRG is the national lobbying office for the state
Public Interest Research Groups. PIRGs are statewide, non-partisan, non-profit consumer
and environmental watchdogs with members in communities and on college campuses around the
country. |
