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“For cards that do not have an annual fee, the bank pays $3 if the holder has a balance at the end of the 12th month after opening an account, a provision that appears to give the university an incentive to get cardholders into debt.”

An article in this morning’s New York Times picks up the ever more gruesome tale of American university students and debt.

Even as the economy tanks, tanked students stagger over to the bright tent at university football games and open a credit card account in exchange for a gift. How innocent they are…

[One] bank has an $8.4 million, seven-year contract with Michigan State giving it access to students’ names and addresses and use of the university’s logo. The more students who take the banks’ credit cards, the more money the university gets. Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.

Their university and the banks have created the perfect sucker storm… Flush with drink and a sense of invincibility as her team wins 27 – 0, the student excitedly accepts her free blanket and her third credit card…

Margaret Soltan, January 1, 2009 7:58AM
Posted in: screwed

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3 Responses to ““For cards that do not have an annual fee, the bank pays $3 if the holder has a balance at the end of the 12th month after opening an account, a provision that appears to give the university an incentive to get cardholders into debt.””

  1. Caelius Spinator Says:

    I don’t have any credit cards yet. My current bank account is a legacy of the University of Chicago having a deal with Citibank, which maintains a branch on campus. This deal mandated that Citibank ATMs on campus do not charge fees to customers of other banks. But this agreement was honored in the breach and the University administration refused to insist on their contractual rights. Were they advertising credit cards, too? I think so. But I steered clear. I’m told the interest rates are obscene on Citibank cards.

    My current institution, Caltech, has a credit union for its students and employees, including those of the Jet Propulsion Laboratory. I find credit unions generally have an interest in more responsible behavior by their borrowers, being owned by them. You can get a credit card with an account at the Credit Union. Their ATMs are no fee (really…). I recommend that all institutions that don’t want to contribute to the student debt crisis promote their credit union and get one if they don’t have one already. Institutions that have deals with big banks are hurting the finances of future donors for money now.

  2. RJO Says:

    Very few faculty members are aware of the multitude of university-sanctioned commercial tentacles that reach into student life, largely because these tentacles extend through the residential and student affairs side of the campus (with which few faculty have contact). UD and other interested people should add the front page of "University Business" to their regular reading:

    http://www.universitybusiness.com/

    For example, UB’s popular list of "101 Smart Revenue Generators" for university administrators includes:

    "14. Draw up incentive programs that increase usage of campus cards. Consider services such as banking, shopping, and restaurants. The first year of Georgia Institute of Technology’s incentive program, which rewards students for funding their one-card accounts at the start of the school year, deposits increased by a total of more than $1 million to $4 million. Students who deposit $500 in their BuzzCard accounts at the beginning of the year receive $50 for campus retail food operations and $50 to use during evening hours at two restaurants located in the student center. Students now put more money on their BuzzCards and spend more money on campus. The program has also attracted outside support, with Atlanta-based Coca-Cola joining in as a sponsor."

  3. University Diaries » Tim, a reader, sends UD an article about student credit cards… Says:

    […] But don’t read it. Content yourself with this New York Times backgrounder. […]

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