The Dirty Secret of Campus Credit Cards

[TexasLawyer]

September 6, 2007
The Dirty Secret of Campus Credit Cards

Issued under affinity contracts, they represent sweetheart deals
between card companies and the colleges.
It's the students who pay the price.

by Jessica Silver-Greenberg


It was three years ago and Irene Leech still remembers the shock clearly. An associate professor at Virginia Tech who specializes in consumer affairs, she read the terms of the credit card that her school, together with JPMorgan Chase (JPM), was marketing to students, alumni, and staff. Behind the card's shiny surface, featuring the football stadium at sunset, the so-called "affinity" card offered some of the most unfavorable terms around for card users.

Among other things, the card had what's known as "double-cycle" billing, where interest is calculated over two months instead of the typical one, resulting in higher finance charges. "I was shocked," she says.

The experience convinced Leech that it was time for her to take a stand. First in a limited way and now more broadly, she has been speaking out against the conflicts of interest that universities face when they strike business agreements with credit card companies. Chase ultimately dropped double-cycle billing on the Virginia Tech card, as it did for all cards earlier this year. But Leech warns that schools that get money from credit card companies through affinity contracts or other marketing agreements face intractable problems, in which the school's financial interests are in direct conflict with those of students and alumni.

"Students assume that if the university has an affinity contract with a bank to offer a credit card, the university will surely look after them," she says. "But these contracts are really money-makers for the school, and not about services to the students."

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http://www.businessweek.com/bwdaily/dnflash/content/sep2007/db2007095_053822.htm?chan=top+news_top+news+index_businessweek+exclusives

[Nikki Stone1]

1. Do the alumni cards work on the same principle?

Thanks

[Nikki Stone1]

2. Apparently they do according to the article

Oops

[Stargazer99]

3. It is time to put some control on these "credit" suppliers

In good old days enitities were not allowed to charge interest rates beyond a certain percentage by law and it was much lower than the present laws.

[Nikki Stone1]

5. In the 1970's, the rate was 7%. It went up to 18% during the Carter years, with 11% inflation

inflation came down, but the credit card rates stayed at usurious levels.

[Selatius]

4. Funny thing is the student loan divisions of many of these companies pay kickbacks to administrators

The kickbacks are to steer unknowing students to the "preferred lender" list even though the terms may not be as favorable as those offered by competitors. There was a big scandal several months ago in the Northeast involving several colleges that were involved in the kickbacks. I think it was in upstate New York. Anyone correct me if I'm wrong.