By Sharon Stello/Enterprise staff writer
Rachel Wikoff received a credit card offer in the mail and signed up, intent on building up her credit rating.
The
recent UC Davis graduate thought she was being careful. She set up
automatic payment through her bank account, always paying more than the
minimum amount.
After about a year, the minimum amount went up,
but she didn't notice and her automatic payment didn't cover the bill.
She was charged late fees, her interest rate leaped from 11 percent to
29 percent and her monthly payment rose from $10 per month to $89. She
couldn't afford the new rates and resorted to taking out a student loan.
“It just ruined my credit,” she said.
Wikoff
shared her story in a telephone news conference Wednesday announcing a
national campaign to educate students about credit card risks and urge
colleges to adopt restrictions for campus credit card marketers.
The
project, by the U.S. Public Interest Research Group Education Fund and
Student PIRG campus chapters, is funded by the Ford Foundation. The
campaign has established a Web site, truthaboutcredit.org, and will
publish research reports on credit card marketing practices.
Campaign
leaders say credit card marketers go to college campuses to recruit
students as new customers, using free gifts to entice them to apply for
low-cost cards - cards that may include high fees and penalty interest
rates in the contract's fine print.
Ed Mierzwinski, consumer
program director of the U.S. PIRG Education Fund, the research and
education affiliate of U.S. PIRG, said college students are vulnerable
targets.
“They're already hammered by the high costs of
education. Credit cards seem like a solution, but they can become a
trap,” Mierzwinski said.
Campus restrictions
At UCD,
restrictions have been in place for several years. Credit card
marketers stopped coming to campus after a University of California
policy was adopted in 2004, said Sheri Canevari, advertising and
marketing manager at the UCD Bookstore, where vendors must register to
come on campus.
“They've just dropped out of sight,” she said.
Among
other things, the policy prohibits on-campus marketers from collecting
students' personal information for credit card application purposes.
The policy was developed in response to a state law, passed in 2001,
asking UC and requiring California State University and community
colleges to adopt policies to regulate campus credit card marketing.
Even
before the UC system's rules were put into place, UCD required that
campus vendors pay a fee, be employees of a recognized marketing
company, stay with their display in an assigned location and distribute
a campus-approved debt education brochure.
The campus also prohibits vendors from approaching students or giving away free merchandise such as T-shirts and phone cards.
Of
course, that doesn't keep marketers from standing just off campus with
freebies and credit card applications. Some students say they've
received free sandwich coupons, luring them to an off-campus restaurant
where a credit card marketer was waiting. And students, just like other
residents, receive credit card offers in the mail.
To educate
students about the potential risk of credit cards, the UCD CalPIRG
student chapter and others across the country have begun a
counter-marketing campaign.
CalPIRG students, some wearing polo
shirts and visors with a logo for fake credit card company FEESA, are
handing out brochures and free gifts - paper FEESA credit card holders
and “don't be a sucker” lollipops.
Margaret Howe, UCD CalPIRG campus organizer, said she hopes information will help students make better decisions.
“I
would tell students to be careful when deciding which credit card to
use,” Howe said, suggesting they research different cards, fully
understand the terms before signing anything and use the card
responsibly.
The PIRG group is collecting signatures on a
petition calling for colleges to adopt these principles for responsible
credit card marketing on campus:
- Prohibit marketers from giving free gifts;
- Limit time that marketing posters and fliers can be displayed;
- Prohibit the sale of student lists; stop group sponsorship in exchange for credit card applications collected;
- Increase financial education for students; and
- Discourage credit card terms and conditions that take advantage of student consumers.
Credit card stats
According
to a 2002 survey by UCD's Student Affairs Research and Information, 88
percent of UCD seniors owned credit cards, compared to 44 percent of
freshmen.
Of the freshmen who had credit cards, 87 percent
reported that they always paid their full balance when due. That number
dropped to 52 percent for seniors.
The survey found that habits
such as incomplete balance payment and skipped or late payment rose
steadily from freshman through senior class levels. And more than 22
percent of the student body had moderate to serious concerns about
their credit card debt load. More than half classified themselves as
“very concerned.”
While students can get credit cards in many
ways, UCD senior Michael Reagan said marketers are still around. Reagan
said he and another student were offered free sandwich coupons on
campus last year. When they went to the downtown restaurant, a marketer
had credit card applications for them to fill out in exchange for the
free sandwich.
Reagan said he filled out the application to get
the free food, but didn't use the credit card when it came in the mail.
These kinds of marketing tactics should not be allowed, he said.
“Credit
card companies shouldn't be targeting the youth, especially with
gimmicks and free stuff,” said Reagan, who is the statewide board
chairman of CalPIRG student groups.
Katy Maloney, interim
director of financial aid at UCD, said she sometimes sees credit card
marketers giving out free T-shirts or water bottles near campus at
Third and A streets.
While it's easy for students to get credit cards, Maloney urges them to use credit only for emergencies.
“Don't think of it as a source of income - it's not,” Maloney said.
Debt counseling
She
said Student Accounting is looking to hire someone to offer debt
management counseling and workshops. Meanwhile, drop-in counseling is
available from 10 a.m. to 4 p.m. Mondays through Fridays in the
Financial Aid office in Dutton Hall. Maloney said counselors can talk
with students about money and debt management in general.
Some tips are available online at financialaid.ucdavis.edu/undergraduate/students/mymoney.html
Heidi
Souverville, orientation coordinator in Advising Services at UCD, said
freshman orientation doesn't include a session on debt management or
credit card risks, but these questions often come up during other
sessions. Current students and Aggie parents offer advice based on what
has worked for them, she said.
A representative from Student
Accounting also talks to new students about paying their UCD bills.
They also discuss student IDs, which can be used to charge UCD
Bookstore items to a student account. Souverville said students and
parents are reminded that not only textbooks, but sweatshirts, makeup
and other merchandise can be charged to a student's account, and all
must be paid for later.
