August 30, 2012
arts and entertainment
mcccagora.com • The Agora
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Buyer beware of credit card traps By Robin Lawson Agora staff
Students beware: They are coming. Credit companies are aggressively marketing credit cards to college students. Their campaigns usually consists of three parts: the draw, the pitch and the ego-boosting close, according to the 2012 Consumers Union, the nonprofit publisher of Consumer Reports. The draw is often a colorful tent placed strategically on campus property or at popular entertainment or sporting events. Brightly colored t-shirts and caps, travel mugs and water bottles, along with all kinds of other fun “gifts” are given out just for signing up. They get you to fill out an application, but tell you not to get your hopes up because most students are not accepted. Next comes the pitch. They tell you all the benefits you get with their card and how your life will be so much better. They point to statements on the application as they talk, giving you the impression that you needn’t read it as they’ve just pointed out everything important. Last comes the ego-boosting close. A surprised look comes over the sales person’s face as they excitedly tell you the great news — you qualify! How about that? And if you’re the least bit apprehensive, they reassure you with the magic words, “You can always cancel.” No more having to aks Mom and Dad for money — now you’ve got your own card; you’re a grown-up. It is at this point that the dizziness in your head prevents you from feeling that one foot has just slipped into — the Credit Card Trap. Now comes the part you didn’t see coming: The Trap itself. If you’re adult enough to get a card, be adult enough to read the fine print. You may find hidden fees. There may be an application fee of $35 which you owe only if you accept the card— and you just did. There could also a $25 fee for activating the card, which you will do by calling the number on the back. There might be an annual fee of $55 or more. All of these go on your first bill and your credit limit for a first time card holder may only be $300. You’re up to $115 and you haven’t even charged the first penny. Let’s say you’re dedicated to being very wise and not charging much. Maybe, to break it in you use the card to pay for lunch, just to celebrate, charging $6. Now we’re up to $121 and you didn’t realize you even owed the $115. Let’s just say you got your card on the first of June, your billing date could be around the 28th of each month, making your due date approximately the July 22. Sounds like a lot of time. But when you get your first invoice, you’ve got about 3½ weeks to make the payment. And it’s not $6, it’s $121! You call the credit card company and they reassure you that you need only make the minimum payment of $20. Whew! You can handle that. They tell you the truth, but not the whole truth. Because, remember?...you’re a grown up, it was your responsibility to read the contract, the fine print. You mail your payment on time. According to your calculations, $121 minus $20 leave a balance of $101. Okay, you’ll pay it off a little at a time and everything will be okay. Then you get your second invoice. Now, there is an interest charge added of $30.55. Student credit cards carry interest rates from 7 percent up to 28 percent and most are on the high side. Now we’re up to $131.55. Even if you don’t make any more charges, if you are only able to pay the minimum payment each month, with more interest charges it won’t be long before you open an invoice to find a $75 over-the-limit fee. Not because you charged anything, but because all the interest charges now put you over your $300 credit limit. If you keep on this way, it just gets you deeper and deeper in debt. You remember the sales person’s words: “You can always cancel.” You call to cancel and are told that, if you do, the entire balance will be due at once and if you do not pay, you will be reported to all three credit agencies and turned over to the company’s “legal” department, which is where no one trained in legalities works; they’re all collection
20 tips for winning the credit game Tip 1: Beware of easy credit offers. If it sounds too good to be true...you know the rest. Tip 2: Don’t let the sales person rush you. Believe me, this offer will still be here later. Tip 3: Realize that credit card companies are the only ones to benefit from this deal, even though the salesman uses a well practiced speech to make you believe this is all for your benefit. Tip 4: Read everything first before making any decision. Tip 5: If you aren’t ready for a credit card, take the free gift, but decline the card. Tell them the interest is too high. Walk away. Tip 6: Ask questions before signing on the dotted line. What are all the fees associated with this card? Make the sales person divulge them all. But just in case ... do read the fine print! Tip 7: Not all Credit Card Companies are created equal. Compare them. Don’t take the first offer that comes along. Tip 8: If a card has a $29 a year annual fee, which will be due on your first bill, then budget yourself accordingly. Don’t charge anything until you pay your first bill of $29, if that’s all you can afford, and pay it early just to make sure the payment posts before the due date. Tip 9: Only charge what you can afford. If you feel you can afford about $40 per month, charge only $40 each month and make sure to pay it off on time to avoid interest charges.
Tip 10: Use the card for necessities if you can’t afford to splurge. Buy the book you need that your student loan or grant didn’t cover. Get more supplies. Because if you pay only the minimum payment due each month on a $1,000 balance with an 18% APR (Annual Percentage Rate), by some estimates you’ll spend seven years and an additional $1,731 in interest to pay back what you owe. Tip 11: Look for a card with a low APR and either no annual fee or a very low one. Tip 12: Make sure you pay your other bills on time, too. Some credit card companies will raise your interest rate even if you always pay your credit card bill on time and in full. That’s because they take into account your bill-paying history with other creditors. If you fall behind on your other bills, your credit card interest rate could rise. Tip 13: Check out the 2012 Consumer Reports article about the best and worst credit cards, based on feedback from 36,000 Consumer Reports readers. The website is www.consumerreports.org. Tip 14: Never take cash advances. The interest rate on cash advances is generally higher than the interest rate charged on purchases made with the card. When you make your credit card payments, the card issuer will apply your payments to the lowest interest rate items first, allowing the debt to mount on the higher interest rate items, such as cash advances. If the company sends you
Some colleges push students to use cards
Nearly half of America’s college students are at schools that encourage students to use credit cards. WJBK Fox News in Detroit reported recently “that as many as 900 colleges are pushing students into using payment cards that carry hefty costs, sometimes even to get their financial aid money.” Colleges and banks rake in millions from the fees, often through secretive deals in apparent violation of federal law, according to a report by The Associated Press. Nearly half of higher-education students, — more than 9 million students — attend schools that have deals with financial companies, according to the AP report. “Now bank middlemen are making out like bandits using campus cards to siphon off millions of student loan dollars,” says Rich Williams, the lead experts. Now you get it? They never lie, they just tell half-truths. According to a 2005 study published by Nellie Mae, a student loan company, an estimated 76 percent of undergraduates carry at least one credit card, and 56 percent reported obtaining their first credit card at the age of 18. The average outstanding balance on undergraduate credit cards was $2,169, and 79 percent of undergraduate credit card holders regularly carry a balance, according to the study. Good credit can open doors for things like renting an apartment, getting a loan for a car, or even buying a house. Bad credit can put even the most basic essentials out of reach and make borrowing money more expensive, or in the
author of a report by the United States Public Interest Group. “Programs like Higher One shift the cost of handing out financial aid money from universities, which no longer have to print and mail checks to fee-paying students.” Mario Parker-Milligan, a 23-year-old student body president at Lane Community College in Eugene, Oregon, realized in less than a semester that he was paying way too many fees to Higher One, the company hired by his college to pay out students’ financial aid on debit cards. The extra fees were incurred by using the card and from ATM fees when withdrawing cash. “The school presented this option as a faster, cheaper way for the college to get the students their money,” ParkerMilligan said.
worst case, impossible. A mistake you make when you are 18 will stay on your credit report until you are 25. Some students report receiving literally hundreds of credit card offers each year, according to a survey by the USPIRG. Some states have placed restrictions on how credit cards can be marketed at public colleges and universities. With financing from the Ford Foundation, USPIRG has begun a national campaign urging schools to adopt some common-sense principles that would help keep students from the “opportunities” of falling into the Credit Card Trap. According to a 2010 report in the Wall Stree Journal, even if you make your payments on time for many years, missing
“It may be cheaper for the college, but it’s not cheaper for the students.” Higher One founder and Chief Operating Officer Miles Lasater defended his company against charges of excessive fees, according to an Associated Press report. “We are commited to providing good value accounts that are designed for college students,” he said, adding that its the responsibility of students to understand the company’s fee list when they sign up for an account. In other words, it’s your fault if you don’t read the fine print before you sign. Lasater also cited a study commissioned by Higher One that found that the median fees charged to each of the 2 million students with Higher One accounts totaled $49 annually. However, Higher One charges $50 if an account is overdrawn for more than
even one payment can result in a high late fee and a drastically raised interest rate, which makes you look less credit worthy. If you started with a credit card limit of $300 at 29 percent interest and after a year are up to $1,000 credit limit at 11 percent interest, credit companies see you as more credit worthy. But if your limit goes down or your interest goes up, it displays you as less credit worthy. In 2008, USPIRG found that students are using their credit cards at alarming rates. They reported that 76 percent of students visited the tent tables when they were on campus, 66 percent said they had at least one card already, 24 percent confessed they were paying late fees and interest payments, 15 percent said they also paid over-the-limit fees, and 6 percent
Finally, a rap song for me By Nicki Kostrzewa Agora editor
Let me just say something, if there is one thing in the world that I am not a fan of, it’s rap music. I just never got into the beats or the lyrics most artists used. It just wasn’t for me. However, after finding the youtube band Dumbfoundead, I can actually say that I like
“checks” for cash advances, tear them into many pieces and throw them away. Tip 15: If you manage your credit card online, be sure to set up email alerts that keep you informed. Many card issuers allow you to set up alerts that tell you when a payment is due, or when you are close to or exceed your credit limit. With your busy school and/or work schedules, time flies. Put your due dates on your wall calender and LOOK AT IT; pick one day each week to go over bills. Tip 16: Never, never loan anyone your card, no matter what. And just as important, don’t use your card as a loan to pay for something for someone else, especially if they get to keep the receipt. Tip 17: Keep things simple by carrying only one credit card. If you must have a credit card, one is all you need to build a good credit profile of on-time payments. Tip 18: After making on-time payments for 6 months, ask the credit card company to lower your interest rate. Tip 19: Get educated about credit. Visit Consumer’s Union’s website creditcardreform.org. Tip 20: This is perhaps the most important tip of all: If you get into credit card trouble, get help. Don’t be afraid to ask a family member for help. A little bit of help now can save you a lot of grief in the future. You can also contact a consumer counseling agency in your area to get advice. Learn more at www. nfcc.org.
Review one rap song! The song is entitled “Are We There Yet.” It talks about a woman’s hard struggle to bring her family to the United States for a better life, then of two teens who are falling in love, and the last segment
is when the artist asks himself, “Is now the time to think, I am there?” I know it sounds cheesy, but it is a very different way to look on rap. Use your words to inspire. Music was made to sound beautiful and elegant, not trashy and out of tune. Thank goodness that rap is starting to take a turn for the better.
45 days, $10 per month if the student stops using their account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents each time the student uses a PIN instead of a signature system at a retail store. Higher One currently has agreements with 520 campuses that enroll more than 4.3 million students, about onefifth of the students enrolled in colleges nationwide, according to the USPIRG report. Higher One isn’t the only company making deals with universities. Under its contract with Huntington Bank, Ohio State University will receive $25 million over 15 years, plus another $100 million in loans and investments for the neighborhoods around campus. Florida State receives a portion of every ATM fee paid by a student. reported their card had been canceled for non-payment. This study surveyed over 1,500 students at 40 schools and universities in 14 states. You may live at home now, but after you start your career, you will want to get into a good apartment complex and eventually buy your own house. Building up your credit in your college years will open the doors to do just that. Many apartment complexes waive the security deposit for applicants with good credit. Car companies lower interest rates and require lower down payments with good credit, saving you hundreds of dollars. Protect your credit. It’s in your own best interest.
Momma had a dream, but she gave it up for me And my sister raising kids, man that ain’t a cup of tea Now she ain’t have no cheese, but took us to Chuck E. Cheese Somewhat of a G, living life so sucka free Told her what I want to be, she was cooler than the breeze Supportive as a beam, cause I knew she had believed If it were up to me, she’d be treated like a queen The life of luxury, filled with shiny pretty things Now I was only three when she brought me to the States My sister only one, crossing borders wasn’t safe What she did was very brave, I think about it everyday From Argentina to Mexico, and finally LA Yes, she made it really far, someone give her an applause Got herself a job, an apartment and a car But the struggle isn’t over so I keep doing my part Straight spittin’ out them bars that’ll get us to the stars
Jonathan Park
Tell me momma, are we there yet?