Papers and plastic
Getting a credit card on campus . . . priceless?
CHRISTINE LEONG VOLUNTEER STAFF
University students are often bombarded with credit card offers through the mail, over the phone and via e-mail. However, along the busy paths of University Centre, students can often find credit card vendors enticing students with a free mug or T-shirt if they apply on the spot. The interest rates aren’t any lower for students — usually 20 per cent after the first six months. Nevertheless, with high tuition fees and expensive textbooks to pay for, taking advantage of high credit limits can be very attractive.
“I think that there is definite potential for students to be harassed by credit card representatives on campus,”
“The lifestyle has become, ‘How much is the bank willing to give you,’ to support a larger lifestyle without being fiscally able to manage it.”
— Robert D. Manning, creditnation.com
noted UMSU vice-president (student services), Melanie Rollins. “I think that students know how to sign up for credit cards if they wish to, and that they do not need to be approached while they are at their place of study.”
Students are a very appealing target for credit card companies. Robert D. Manning, a specialist in credit and the developer of creditnation.com, which offers advice and information on the subject, explained two reasons why these companies have expanded their market to post-secondary students. One is because they know students have large school expenses that can be paid for with loans. Secondly, if these students get into serious trouble financially, many are close to graduation and can find a job that can pay off the debt, or they can put pressure on their family to pay it.
“It is somewhat worrisome that university students are able to get credit cards much easier than non-student applicants,” mentioned Rollins. “Allowing students to enter into draws if they sign up for a credit card may be an effective means of garnering student users for ‘x’ company, but I think it is unfair to target students in this way.”
Manning also noted that companies “prey on social anxiety and encourage students to enjoy an older lifestyle,” but in the meantime, they do not have the financial means to support it.
“There is also a competitive pressure on campus,” Manning said. “If you increase consumer credit, you increase the pressure to consume among college students. The lifestyle has become, ‘How much is the bank willing to give you,’ to support a larger lifestyle without being fiscally able to manage it.”
What is alarming is the confused notion that credit limits and government student loans can be thought of as current “income.” According to a Statistics Canada report, “National Graduates Survey: Student Debt” published in April 2004, 41 per cent of college and 45 per cent of bachelor-degree students graduating in 2000 were in debt to government student loans. The average government student debt owed at graduation was $12,600 for college students and $19,500 for bachelor students. Five per cent of college students and 14 per cent of bachelor students owed $25,000 or more in student loans at graduation.
In terms of private or non-government sources of loans, only eight per cent of college and eight per cent of bachelor students are in debt. Those with only private loans owed $9,500 on average. Bachelor graduates who owed to both sources were in a debt of $32,000 on average. In comparison to the class of 1995, students in bachelor programs graduating in 2000 owed 30 per cent more. These increases reflect the rise in tuition fees over the 1990s.
Rollins noted “it is unfortunate that many students have to use credit cards to help pay for their education and as a way to supplement insufficient loans and grants. Regardless of the reason students have for accessing credit, it is probably best that students make a decision based on all of the information available, and after comparing all of the options and assessing their need, rather than obtaining credit cards because they wanted to get the free CD that came with the application.”
It appears access to credit cards has been made available at an earlier age than ever before. Furthermore, almost every retailer accepts credit cards. Manning raises further concerns about students’ reliance on credit.
“Those who are complacent or dependent on credit and not being able to make independent decisions for themselves,” Manning said. “They are constantly trying to pay the next bill.”
Some students place the blame on the consumers who are ignorant about the proper use of credit. “If [students] want debt for a cheap mug it’s their problem,” said University of Manitoba student Stacy Galas.
It appears that the student population in general has the tendency to misuse credit cards. Manning noted that a lack of personal experience may contribute to this tendency.
“[Credit] has gone from an earned privilege to a social entitlement, whether it’s because they are a student or middle-class.” Manning added that these students’ parents, on the other hand, had to “prove worthy” in order to develop credit.
The U of M Alumni Association offers current and alumni students a University of Manitoba Mosaik MasterCard. According to Jo-Anne Thompson, manager of Affinity Programs and Services for the U of M Alumni Association, this card offers low credit limits, which will “enable students to develop experience with credit with a lower credit risk.”
“We’ve offered credit cards to our alumni and students for the past 19 years,” said Thompson. “Staff are dedicated to providing credit education to students.”
Furthermore, this card can be customized to a student’s liking. Students can choose between an AIR MILES or Mosaik CashBack Reward Program ranging from an annual fee of $0 to $80. They can also choose between an interest rate of 18.5 per cent with no annual fee, or a lower rate of 11.4 per cent for $25 a year. An introductory interest rate of 5.9 per cent on cash advances and balance transfers is offered for the first six months.
And it is attractive. The card features a picture of the U of M administration building, which “illustrates the user’s pride,” according to Thompson, and a portion of the user’s fees go toward the Alumni Association.
Olivia Yu, Environics Communications consultant for MasterCard, claimed it is important to have a card at a young age to establish a credit rating. “A credit rating is an assessment of how likely you are to meet your financial obligations (i.e. pay your bills). The meter starts ticking the minute you are given access to credit in your name . . . Whether you are applying for a loan, renting an apartment or hooking up your Internet, your credit rating will probably be checked.”
“MasterCard and its customer financial institutions only market to Canadians age 18 and up,” Yu continued. “Also, a credit card used appropriately is a first important step in financial independence.”
Thompson added that credit cards
“The meter starts ticking the minute you are given access to credit in your name . . . Whether you are applying for a loan, renting an apartment or hooking up your Internet, your credit rating will probably be checked.”
— Olivia Yu, MasterCard
are “the number-1 choice of consumer payment in Canada. With many credit card choices available to Canadians, there are opportunities to apply for any one of these daily at shopping malls, sporting events, grocery stores, et cetera.”
“Credit cards are an extraordinary innovation,” Manning recognized. “If they are used properly they can enhance a person’s life. However, if they are used improperly they can lead to extraordinary negative consequences. In some extreme cases, suicides. Also, some students have become so poor they cannot find a job or an apartment. Their personal relationships and marriages are sacrificed.”
In December 2004, the Simon Fraser Students’ Society (SFSS) raised daily fees for on-campus credit card vendors from $35 to $1,000 a day in an effort to reduce aggressive solicitation, which may contribute to student debt. In addition, 80 per cent of the profits were to be directed towards the students’ society’s bursary program.
“Once the $1,000 fee was instituted, we stopped getting bookings and effectively eliminated their presence,” said Derrick Harder, president of the SFSS. “However, several weeks later the SFU alumni association invited a credit card company to do an affinity agreement, i.e. ‘get an SFU MasterCard!’ and they promptly got approval from the university to set up a vending booth outside of student society space.”
“So, while we got them out of our space, and bear no moral culpability, we did not eliminate them from campus,” said Harder.
Although UMSU has not implemented a large fee increase for on-campus vendors, Rollins noted their concerns on the impact these credit card companies may have on U of M students.
“There are several other student unions and campuses across the country who have either banned credit card companies from their campuses, or have created prohibitively large fees in order to operate,” said Rollins. “During UMSU Orientation 2006, credit card and tobacco companies were not even considered for sponsorship of the orientation program . . . Outright banning credit card companies from campus may seem a bit extreme to some, but I don’t think many students would be upset by the change.”
The University of Manitoba currently charges only $50 plus GST a day for vendors, including those offering credit cards, with fees doubled for events such as Orientation and Celebration Week. There were no credit card companies represented during either of those events last year.
“There are, however, other options the university could employ,” Rollins commented. “The U of M could put restrictions on the number of times marketing companies can come to campus in a year. They could also require that there be one week per year and one week only for credit card companies to be present on campus, and they could encourage independent credit counselling booths to set up during this same week. Another option is to prohibitively install massive fees, but making more money off something does not make it more right.”
Manning stressed the importance of saving. “Whether it is a symbolic or a dollar amount, people should be saving something. They need to be cognizant of all the expenditures that are going out. It is easy to see what is coming in. It is important to watch for the small expenses in order to keep track of the long-term expenses.”
“The subliminal message that students are hearing is that if you increase your spending you are going to have more fun,” Manning said. “But, once you are in debt, it’s hard to get out.”
