A new school year is about to begin in the school of hard knocks. College students will face a wall of credit card offers.
It doesn’t seem logical. Why would credit card companies want to account unemployed holders who are usually low on funds, and will have difficulty making their monthly payments?
Credit card companies do not make billions off people who pay their balance in full. Credit card companies make their billions from high interest rates and late payment fees. Most financially illiterate college students are perfect customers for credit card companies.
And credit card companies have help from an unlikely source. Colleges and universities are in cahoots with the credit card companies! Many alumni associations and schools make money by referring students to apply for credit cards and, now, even debit/student ID cards! The primary education many of these students who fall for these offers being pushed by schools will receive may come from the school of hard knocks.
Many credit card customers tend to dislike credit card companies. By raising interest rates and increasing fees at will, credit card companies have all the power in the relationship they have with credit card customers who use credit cards. Much of the news about credit card company behavior shows them as excessively one-sided and selfish. However, credit card companies are required to declare the rates, fees, billing practices and triggers for increases in rates or fees on every credit card application.
This information is provided in the “Schumer Box”, named for Sen. Charles Schumer (NY) who sponsored the law in 1988 which requires credit card companies to declare certain information in a simple format in every credit card application in the “Schumer Box”.
CNN and Money.com offer a great article explaining how to use the information in an application’s Schumer Box to determine if the credit card offer is a rip-off. The article is easy to read and guides the reader through each of the Schumer Box features. For more information, read “How to spot a credit-card rip-off“.
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