Avoid Credit Card Predators - Your Future is at Stake!  

By Sheryl Nance-Nash 

Back to school means buying books, meeting up with old friends and hard work. But it may also mean being greeted by credit card companies hoping to catch you in the credit card trap. Students with no job or part-time jobs and an available credit balance are a bad combination. 

In fact, in some cases universities and credit card companies are striking cozy deals leaving students as enticing bait. According to the Consumer Warning Network, attorney generals in Florida and New York are investigating conflicts of interest and deceptive practices in the student loan industry. 

There are more than a few cozy relationships between credit card companies, universities and university-affiliated fundraising groups. The investigation focuses on marketing of cards with school logos and mascots to undergraduates through contracts between universities and the banks that issue the cards. This summer, Congress held hearings on credit card marketing tactics on college campuses.

Credit card companies are sparing little in going after students. They give out freebies including, low-cost airline tickets, tee shirts bearing the college logo or stuffed animal mascots of the school, candy, pizza, Frisbees, travel mugs, free tutoring and even iPods, says Harrine Freeman, author, How to Get Out of Debt: Get an "A" Credit Rating for Free.

"Colleges and universities accept money from credit card companies to solicit students with ads for credit cards and more," says Freeman of the sign up strategies. Students without jobs or enough income to qualify for credit cards are sought too. Credit card companies are reaching out to students on MySpace and Facebook. "Facebook partnered with J.P. Morgan Chase to promote the Chase credit card. Facebook members will earn reward points for specific actions such as paying their bills on time. You can convert your points into a charity donation, or redeem them for ‘fraternity prizes' such as TVs," says Freeman.

Bank of America offers more than 70 cards that are affiliated with colleges and universities. Chase has more than 25 cards that are similarly affiliated, says Andy Jolls of VideoCreditScore.com, which seeks to educate consumers about credit. "Some schools appear to have a blind eye towards credit card company marketing practices," he adds.

On some campuses students are urging administrators to remove credit card marketing from campus. Some schools are pushing back too. At the University of Miami in Coral Gables, there is a special program, "What's in Your Wallet?"  to alert incoming freshmen to the risks of uncontrolled credit.

"One of the major challenges freshmen college students face when they leave home for the first time is balancing a checkbook (online or hard copy) and managing their expenses. The result is a financial disaster in some cases, one that parents ultimately get stuck bailing their children out of. To help students become more financially savvy, all incoming business students go through a freshmen orientation that includes a video and team discussions aimed at helping them understand the potential pitfalls of using credit cards," says Linda Neider, vice dean of Undergraduate Business programs.

At the University of Hartford credit card solicitation on campus is not allowed. "Most students are already acquiring a boatload of debt with student loans. It's just too easy to lure these students into signing up for a credit card with a promise of a low interest rate that becomes more than 19 percent after six months," says Susan Fitzgerald, assistant vice president for student health and wellness.

Credit solicitation is also not allowed at Roberts Wesleyan College in Rochester, New York. "Schools should and generally are trying to educate students on consumer debt, the importance of establishing strong credit early and about saving and investing," says Barry Smith, vice president for student life.

And given the statistics, some students are failing those financial literacy lessons. "The average credit card debt owed by college students is about $2,700, with close to a quarter of students owing more than $3,000. Some 10 percent owed more than $7,000," says Jolls.

"People 25-36 now have the second highest rate of bankruptcy, just after those 35-44," says Marwan Forzley, president of eBillme.com. 

PLAY AND WIN

Credit can be a good thing, if you know how to work it to your advantage.

Apply for and use only one or two credit cards. The more cards that you have the easier it is to abuse credit and the more difficult to keep up with your charges and payments, warns Tom Potts, professor of finance and director of the financial services and planning program at Baylor University.

Make your payments on time. If you pay on time this can improve your credit score; late payments can result in hefty late fees, higher interest rates and lower credit score.

Pay more than the minimum. This will shorten the time to pay off your credit card debt and can also improve your credit score. "If you charge $1,000 on a card with a 17 percent rate and make the minimum payment of $25 a month, it will take five years to pay off that loan," explains Tanisha Warner, communications specialist with Consumer Credit Counseling Service of the Gulf Coast in Houston. "Ultimately, almost $500 will be paid in interest alone. By increasing payments to $50, it would take 24 months to pay it off with just over $180 in interest charges," she adds.

Be aware of credit limits and do not exceed them. Going over your limit is a red flag to the credit card issuers and it will lower your credit score. If you utilize a lower portion of your available credit, this will boost your credit score.

Use debit cards. "Debit cards are better for college students. It has a dollar limit and when the money is spent, the bank is closed. This requires the student to learn how to budget and be accountable, which is a very powerful life lesson," says Debi Yohn, counseling psychologist, www.collegeworks101.com.

Live Within Your Means

Keeping your credit and finances in order comes down to this - setting a budget and sticking to it.

Be flexible. Make your budget flexible to accommodate unexpected expenses and include savings goals. Include monthly expenses and debt plus your monthly income. This will help to readily see the areas where you can reduce expenses, explains Freeman.

Develop good spending habits. Comparison shop, buy items on sale, get online deals.

Separate needs from wants. Ask what's really important? Avoid buying on impulse, delay purchases over a certain amount until you give yourself time to "think it over."

Pay with cash. If you don't have cash, you probably can't afford it, pass, or save up and get it when you can.

For more information:

www.collegeboard.com/student/plan/college-success/9139.html

www.videocreditscore.com

www.collegeworks101.com

www.nelliemae.com/pdf/Credit-management-Guide-for-Graduate-Students.pdf