Report shows most students in good credit standing

Report shows most students in good credit standing

Some students wary of recruitment by credit card companies,
campus solicitors

By Lia Ramsey

Daily Bruin Contributor

Shannon Faherty is a typical UCLA student with several bills to
pay, a part-time job and one credit card. She is also living
evidence that a charge card can spell trouble in the hands of a
poor college student.

"For me, when I have a credit card, I just take it out of my
wallet and, you know, hand it over," Faherty confessed.

She went on to explain that the convenience of a credit card
distorts the reality of spending actual money.

"You have no concept of how much you spend. It doesn’t hit home
until you get the bill in the mail," she said.

Although some students weigh in with credit card nightmares, the
credit card industry reported that students are relatively
responsible credit card holders.

A recent Visa Corporation report concluded that students are
better credit card customers than most adults. Also, studies at
Bank of America have shown that students pay their balance in full
most of the time before interest begins to factor in.

"The credit card industry finds students less risky or on par
with the general population in paying their bills," said Betty
Reiss, corporate communications director at Bank of America.

"Students are very conscientious about maintaining a good credit
rating because they recognize that they are building their credit
history," she continued.

This confidence in student credit often translates to intense
marketing campaigns on college campuses. Since credit card
companies see students as responsible cardholders, they are known
to target college campuses for prospective customers.

The Discover Card company bases their student marketing strategy
on the hope that student card holders will eventually graduate and
become adult card holders with jobs in the professional world, said
representative Beth Meltzer.

This belief may help explain credit card companies’ mass student
mailings and aggressive on-campus marketing – techniques that are
the target of some student criticism.

Although senior pre-psychology student Stacy Copeland said she
has no trouble paying her bills, she said credit card companies
sell their cards to students, "because they think that students are
going to charge their cards way up and their parents are going to
have to pay for them."

Junior biochemistry student Shahriar Farzad believes card
companies actually want people who take a long time to pay off
their bills, or who are ‘bad’ at making prompt payments.

"That’s their point. They want long-term customers. Students
have to pay eventually and the companies will take in money off of
the students’ interest," he said.

Some students also recalled credit card disaster stories that
they hear about their colleagues and friends.

"I have friends who have $800 to $900 on their cards. I have one
friend who is already in debt because of tuition and he just bought
a new computer for $5,000 or $6,000 and put it on his card,"
explained graduate student Caoimhin O Scanail.

Some of the confusion also lies in the credit card companies’
policies’ fine print.

Visa currently offers a 5.9 percent fixed introductory annual
percentage rate, but after April 1, the fixed rate jumps to 13.99
percent. Mastercard features a 6.9 percent introductory rate, but
that jumps to 14.65 percent on Sept. 14.

Credit card companies also differ on their cash advance fees,
the extra money charged to a credit card when money is drawn from
an automatic teller machine. Visa charges a 2 percent fee on each
advance, but never less than $5.

American Express has an annual percentage rate for cash advances
of 21.65 percent.

Although the student credit cards eventually catch up to the
rates charged to adults, the low introductory rate is a feature
mostly offered to students.

The low rate is part of the package financial institutions have
designed specifically for students. But the primary difference
between student cards and regular credit cards is that student
cards generally have a much lower spending limit.

The main incentive for students to buy a student card rather
than another credit card is that student cards are, "specifically
geared for someone who hasn’t built a credit history," Reiss
said.

And although credit card companies are eager for student
customers, applicants are expected to demonstrate a measure of
financial security.

To be accepted for a student Visa card, one must show they are a
full- time student, age 18 or older, and that they have a
verifiable $200-a-month income above and beyond paying for tuition,
books, living arrangements, etc. Also, for Visa specifically, a
student must show that he or she has a checking or savings account
in good standing.

Credit card companies use a variety of approaches to sell their
credit cards to students. Information tables on campus, "Take One"
boxes, applications at banking branches and ads in campus
newspapers are common techniques.

In attempts to reach mass numbers of students, companies mail
home information packets that include applications, and call
students at home. Companies get a list of student names and
addresses from campuses across the nation and conduct mass
mailings. Phone numbers are collected the same way for
telemarketing.

UCLA policies stipulate that the university may only distribute
information about students who have agreed to have their names and
addresses released to the general public. Students can control the
release of their personal information by indicating on their
registration forms at the start of each quarter, reported associate
registrar Anita Cotter.Comments to [email protected]