It was a gloriously sunny day in 1999. As a freshman, the newness of college hadn't worn off yet, and I was making my way across the campus of Western Michigan University.
I don't remember where I was going, but I know I wasn't in a hurry. So when I came across a table surrounded by students, I didn't think twice about slowing down to investigate. A very helpful student -- obviously older and more experienced than me -- handed me a clipboard and asked if I would like to sign up for a credit card.
I didn't need a credit card; it hadn't even occurred to me that I wanted a credit card. But this helpful student was offering me a free t-shirt (gasp!) if I filled out an application.
Did I ask about the interest rate?
Did I ask about the annual fee?
Did I even ask about which company was offering the card?
The answer to all these questions was no. I had some vague idea that a credit card was something my parents used when they couldn't otherwise afford something, but beyond that, I was clueless. Still, it didn't seem like a big deal to complete the application, so I did and walked off with my brand new t-shirt.
Then a few weeks later, my shiny new piece of plastic arrived in the mail, and I suddenly had $500 I couldn't afford but could spend.
Colleges and cards: A questionable match
I certainly wasn't the first or last person to enter the world of credit cards due to a chance encounter on a college campus. While the government has essentially done away with those enticing t-shirts and other freebies, there may be new dangers lurking on campus for unsuspecting students.
The Consumer Financial Protection Bureau has launched an investigation into college practices regarding financial products. At the center of the inquiry seems to be student credit cards that not only serve as identification but also double as a means of payment.
Other institutions are loading scholarships and student loan funds onto debit cards. These cards may come with hefty fees, and students may not be informed of other, cheaper ways to access their money.
Government revisits campus agreements
While the Credit CARD Act of 2009 requires the public disclosure of agreements between credit card issuers and higher education institutions, debit cards and other financial products aren't subject to the same scrutiny.
However, the CFPB inquiry seeks to shine a light on how colleges offer financial products to their students. Among the information being sought by the bureau are the following details:
- What information is shared with financial institutions by schools
- How financial products are marketed to students
- How students use these financial products
- What are the fees associated with the products
Those who wish to comment on this subject are invited to provide their input to the CFPB by March 18.
As for you, what do you think? Are student credit card offers a convenience or merely a convenient way for financial firms to take advantage of naïve students?