Predatory Lenders on College Campuses Teach the Wrong Lessons About Credit

My husband likes to tell me about his college days, in the early 90s, before I knew him. One of his favorite memories is about his first experience with credit cards. He remembers being a college freshman, new to northern Michigan, stepping onto the campus for the first time. Expecting to be greeted by helpful upperclassmen and faculty who were there to escort him into the beginning of the rest of his life, he had a rude awakening - he was greeted by ‘the credit card guy’.

Still a fairly new marketing tactic at that time, campus recruiting by credit card companies was not looked down upon as the sleazy and unscrupulous predatory practice that it is. Older brothers, sisters, and cousins did not yet know to warn their younger relatives about ‘the credit card guy’ that would find them in the student center. The idea that you could get a free long distance calling card, T-shirt, or pizza just for filling out a short application was too good to pass up. Credit card companies know that starting college is an exhilarating experience; you feel empowered to make adult decisions, typically for the first time in your life. So, ‘the credit card guy’ makes sue that the very first ‘adult’ decision you make is to get a credit card you know nothing about because you want free pizza. Although the credit card companies claim that they are providing a valuable service to studnets, U.S. News and World Report agrees that this practice is questionable at best:



Just like many other unsuspecting freshmen, this campus recruiter convinced my husband that he needed a credit card, so he applied and was easily approved. Happy about his newfound freedom and means, he told his older brother about his credit card, expecting a good pat on the back. Instead, his brother was outraged. He had a steady job and living arrangements, paid his utilities on time, and was basically doing everything he could do to be financially responsible, but he couldn’t get a credit card to save his life. He was repeatedly denied because he didn’t have enough assets or income, according to the credit card companies. His little brother didn’t even have a job, and he just waltzed onto a college campus and got a card with a $500 limit? How unfair! Living on his own, he really needed credit to take care of business, yet his little brother, with absolutely no way to repay his debts, was able to get what he had been working hard for by simply checking “yes” in the box marked, “Are you a student?”

Needless to say, my husband was shocked and confused.

Now, in hindsight, he can see why his older brother was so angry. While his brother had intended to be responsible with credit he could not attain, my husband was absolutely irresponsible with credit that he did not have to work for at all. It helped to warp his idea of the purpose and proper use of credit, which took years to undo. However, because it caused him to plummet into debt so quickly, he can see why he and other college studnets were targeted. Low income plus easy credit equals a lifelong customer for credit card companies. With mass marketing of financial products to and predatory lending becoming a part of mainstream American culture over the past 20 years, young people and people with low incomes can almost expect to be able to get something for nothing. That’s why the mortgage industry crisis has crippled our economy. Sub-prime mortgage lending was ‘the credit card guy’ of the housing market.

Except no one got a free pizza.

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Protecting My Identity As I Build My Credit

I am not even 30 years old, and I have already had my identity stolen twice. It’s easy to assume that I may have been irresponsible with my personal information, or must have at least had my purse stolen before. There has to be a logical explanation, right? The fact of the matter is that I didn’t give out my social security number any more than anyone else going to school and working a job. I protect my belongings and my personal info like a lioness protects her cubs. Yet, it still happened, and it makes me more cautious -- even paranoid -- about the methods I use to rebuild my damaged credit.

A few years ago I learned that a woman in Wisconsin was using my social security number. She wasn’t buying extravagant luxury items on credit cards in my name. She was working and acquiring basic necessities, including average consumer credit, with my number. An expert in the field of private investigation informed me that oftentimes young people with average to slightly blemished credit histories have their social security numbers stolen and sold illegally to adults who do not have social security numbers, who need them to work and acquire basic necessities. If they do not go overboard in their spending and they pay their bills on time, their activities often go unnoticed.

I also had my identity stolen by a family member. Despite careful protection of my personal belongings, a desperate relative went rummaging for identification information - right after I openly stated that I had gone to the Secretary of State to renew my license. I didn’t put it together until after the culprit was discovered, but that didn’t happen right away. I had to argue with the local Social Security Administration office about when and where I applied for my last duplicate card before I realized that someone close to me had pulled a fast one.

I have always heard the gurus say that in order to build credit you have to have credit; using credit cards responsibly and spending less than you make is the only way. Well, how do you do that without putting yourself at risk? If someone gets a hold of my social security number, they will be able to access those credit accounts and use my credit illegally. What if someone intercepts my credit account statements? These days I protect my social security like the Hope Diamond, so I want to build my credit while using my social security number as little as humanly possible.

That’s why I like prepaid credit cards.

Your social security number is not connected to a prepaid credit card; you simply load it with cash and use only what you have on it. If someone finds your lost card, they can’t use it to follow any paper trail to your vital information. Since you can’t use cash to make online purchases, secure rental vehicles, make hotel reservations, etc., plastic is a must-have necessity for living. However, if you want to be able to live without your social security number being a big red target for thieves, you can use prepaid credit cards to do so.

I am particularly impressed with the AccountNow Visa because it includes credit reporting! That’s right, if you make bill payments with the AccountNow card, you can get positive credit reporting to assist you in building initial credit history or rebuilding damaged credit. It is truly possible to make strides toward a healthy credit score while minimizing personal risk.

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No Preset Spending Limit with the Advanta Business World MasterCard®

We've added the Advanta Business World MasterCard® to our lineup of recommended business credit cards. This card does not come with an attractive 0% balance transfer offer, and it the purchase APR is currently 16.99% (indexed to Prime.) So why do we like this card?

Because for certain individuals this card could be a very nice fit. Those small business owners who pay their credit card bills in full each and every month -- thus avoiding any finance charges -- will almost certainly find the "no preset spending limit" aspect of this card attractive. This card is very unique: it's a credit card with no preset spending cap. Usually, only charge cards like the Gold Card from American Express card have no preset limit.

Here's a clip from the Advanta Business World MasterCard terms and conditions:

"....Because your account has no pre-set spending limit, we may permit you to incur charges that cause your balance to exceed your revolving credit limit. We may evaluate each such charge based on your account performance with us and your experience with other creditors. Any amount that we allow you to spend above your revolving credit limit will be due in your next statement, but we will not charge you an overlimit fee. All rates, fees and comparisons are valid as of April 1, 2008 but not necessarily thereafter. You should consult your tax advisor as to the proper tax treatment and deductibility of any business expenses, including the cost of credit..."

No need to worry about being charged an over-your-credit-limit fee, ever. But, if you do go over your credit limit, be prepared to pay whatever amount you go over when your next statement arrives. If you want to spend above your limit but Advanta decides not to permit the overage, the charge will be declined.

Interested? Click here to apply.

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Free Money from American Express & Costco

Yes, that's right: American Express and Costco have decided to give you $25 for free. So, what's the catch you ask? Here it is: all you have to do is signup for the True Earnings® Card from Costco and American Express and, once your account is established, you will get a statement credit of $25 after you make your first purchase.

This is a pretty exciting offer, especially considering that this credit card is already one of the best rewards cards we've ever encountered. Here are some other great benefits:

• Earn cash back virtually everywhere you go - 3% for gasoline, 3% for restaurants, 2% for travel, 1% everywhere else, including Costco
  
  
• No Annual Fee with your paid Costco Membership
  
  
• The TrueEarnings Card serves as both your American Express Credit Card and your Costco Membership Card
  
  
• No Limit on the Cash Back earned

This card is tied with the Discover Open Road card as the best consumer gas rewards credit card.

This offer special statement credit offer won't last forever, so if you are planning on getting this card, try not to procrastinate.

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Large Savings Account vs. Paying Down High-Interest Credit Card Debt

Most of us know that paying interest on credit card debt is one of the best ways to throw away money, no doubt. With regard to contemporary credit cards offered by reputable American banks, money-savvy consumers:

• surf 0% credit card offers
  
  
• are never late with payments
  
  
• make every effort to keep their credit score high so that they can qualify for the best -- best as in most consumer-friendly -- credit card offers available in the market
  
  
• if they aren't surfing 0% offers, pay their balances in full each month to avoid interest charges
  
  
• take full advantage of their credit cards' rewards programs.
  
  
• use credit cards to pay for all types of goods and services, so as to take advantage of the excellent consumer protections that most credit cards provide like zero fraud liability and purchase protection.
  

Bottom line: if you are a solvent and responsible consumer, credit cards work for you, and not the other way around.

Sometimes, I encounter a friend of family member who is paying interest on credit card debt, but who also has a relatively robust savings account. I explain how this doesn't make sense, because if you are paying e.g. 12% interest on your debt, and making 3% in your savings account, you are losing money -- and plenty of it -- each and every month. I often hear the excuse, "but I like to have a rainy-day fund." Yup, establishing and maintaining a rainy-day fund is an excellent idea, but it's important to find the right balance. I agree with the advice in today's YouTube.com clip: the only situation where it's reasonable to pay interest on credit card debt is if you have a good reason for stashing away a lot of cash, like if you believe that you're about to get laid of from your job. Here's the clip:

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