Is Your School's Alumni Association Bank Of America's Whore?

Bank of America has been strolling across college campuses, handing out budget-propping fees to alumni associations in exchange for agreements to provide unrivaled access to a trusting and loyal customer base. The perverse agreements encourage universities to earn kickbacks by convincing their already indebted students to use school-branded credit cards to take on even more debt.

According to BofA, which dominates the campus market with more than 700 affinity deals, the primary targets are alumni and college sports fans, who hold 96% of the cards. The bank won’t disclose how many of those cardholders first signed up as undergraduates. BofA also declines to discuss any specific contracts but says students are just as responsible with credit as older adults. “When it comes to students, we take a fair and responsible approach to lending,” says spokeswoman Betty Riess. The bank gives educational material to student customers and doesn’t hit them with higher rates for late payments. “Our objective is to create a long-term banking relationship*,” Riess says.

BofA stresses that it gives credit cards to only half of all student applicants. Nevertheless, many undergraduates obtain more than one card, accumulating substantial overall debt. College seniors on average carry $2,864 in credit-card debt, according to Nellie Mae, a division of student lender SLM Corp (SLM). Two-thirds of college students now graduate owing money on tuition loans, and that debt averages nearly $20,000.

* = “long-term banking relationship” may consist wholly of debt service [Ed.]

Agreements between banks and private universities are private, but public universities can’t hide behind the same veil of secrecy:

  • The University of Iowa: In exchange for access to the school’s 29,000 students, Bank of America pays $1 million per year to the school’s alumni association—25% of its operating budget.
  • The University of Delaware: Bank of America pays the school’s alumni group $300,000 per year—90% of its operating budget.
  • Ohio State: MBNA paid $1.2 million in 2006 for access to 55,000 undergraduates. Ohio State also sold access to faculty, staff, and students’ parents.
  • The University of Michigan: Bank of America will pay the alumni association at least $25.5 million over 11 years, including 0.5% of all purchases made on school-branded credit cards. The bank also pays $6 per year for each active student account, and $5 per year for each alumni account.
  • The University of Minnesota: Chase will pay the school $360,000 over five years, plus $1 for each new cardholder, and $3 annually for each active cardholder.

The universities don’t always understand why these deals might be criticized as craven and immoral.

Penn State’s alumni association views the affinity card as a legitimate service and means of raising revenue, says Executive Director Roger Williams. “Credit is not a bad thing,” he says. “In fact, you can make an argument that the American way of life is predicated on the generous use of credit.”

Great argument, teach! In fact, you can also make an argument that the subprime meltdown is predicated on the generous use of credit. But let’s not let facts distract from the proud American tradition of cloaking wrongdoing behind sound bites.

Credit isn’t a bad thing, but the credit cards pushed through these exclusive arrangements are burdened with abusive terms. College kids don’t always understand what it means when a 4.9% introductory APR automatically soars to 18.24% after six months. Colleges have a responsibility to promote good financial habits while protecting their students.

Students should also be responsible, not just for understanding that t-shirts are a poor trade for completed credit card applications, but for holding their schools accountable. Student governments should actively press administrators to disclose and dissolve financial ties with credit card companies.

In the meantime, New York Attorney General Andrew Cuomo is focusing the government’s powerful and retributive eye on the shady agreements. Maybe we can get another university ass-kicking to rival that whole corrupt lender thing that recently worked out so well for everyone.

The College Credit-Card Hustle [BusinessWeek]
RELATED: Credit Cards Ensnare Naive College Freshmen
(Photo: Getty)

Comments

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  1. backbroken says:

    “College kids don’t always understand what it means when a 4.9% introductory APR automatically soars to 18.24% after six months.”

    Yeah. I really don’t expect recent Penn State grads to understand basic math.

    Just kidding out there, Penn Staters.

    Not really.

  2. MercuryPDX says:

    I think my alumni association is more the “Gang-bang” type. I get offers for credit cards with the school’s logo, and “special home and auto insurance deals, exclusively for alumni” in envelopes from the alumni association.

    I also get those “Who’s Who” book invitations from them.

  3. Parting says:

    @backbroken: There is theory. You can master it. But most college students are still immature and also master ”magic thinking” that they’ll solve their money problems magically.

  4. Miss Scarlet in the Hall with a Revolver says:

    I just received a credit card offer from my alumni association. It is a BOA credit card. I promptly shredded it.

  5. Bill says:

    I got one of those from Texas A&M. I sent them a nasty letter and got off their list. They wont discontinue the program because they get a million dollars a year from BoA.

  6. SonalLilja says:

    Yes they are! During my first week at UCLA for undergrad I was bombarded
    with goodies (shirts, towel, hats, pens) to sign up for an MBNA UCLA Alumni
    card. I gave in—lord that hat with the Bruin needed to be mine—and so began
    my indentured existence with the card.

    Even though I began with a $500 limit, it was increased multiple times
    throughout the first year since I was such a “good customer.” My full ride
    at UCLA did not cover the tuition increases that were implemented my fourth
    and quarter into my fifth year and the credit card seemed the easier path to
    filling the gap (stupid of me for not applying for a Perkins/Stafford loan).
    I graduated with over five thousand dollars in credit card debt (little
    compared to my other friends). Paying the minimum was not cutting it when
    my APR was 14%, not the 6% I was told I would always have. Even though I
    initially refused my parents help (and they are extremely poor), I accepted
    their savings to pay off my debt (by now a little over $6500). Got my butt
    on a plan to pay them $600 a month (60+ hours a week in addition to side
    education consulting jobs to help) until they were fully repaid.

    It was embarrassing to say the least since I talked about being independent
    from my parents throughout undergrad, but here they came to save me when I
    just could not hack it. My MBNA log-in screen is now the Bank of America
    site. No more credit card debt for the last three years.

    If I canÂ’t pay for it in a month, I just canÂ’t afford it.

    -Anonymous

  7. ChuckECheese says:

    My grad school (Wash U in St Louis) started doing this nearly 10 years ago with an MBNA-now-BOA card. I wonder how many solicitations they’ve sent in that decade?

  8. Ubermunch says:

    Trust me… students know what’s going down with these kind of cards. They know they are poor deals. It’s just that most of them figure that they will earn enough to pay the card off with no hassles and they need money for spring break and pr0n NOW. Sadly, although they understand the raw deal they are suckered by the mirage of hope/pay/immortality.

    Which… when you think about it… doesn’t make them any different than a lot of other demographics. Right home flippers?!?

  9. iblamehistory says:

    I graduate in November and I have got these offers several times a year since 2004. First one, I opened it, saw what it was, and I’ve never opened another one since then.

    Then again, I didn’t even own a credit card until my junior year of college, when I decided that my opposition to having any debt needed to be changed ever so slightly so I could start building some credit

  10. Audiyoda says:

    Michigan State Univ. must have a deal with MBNA – either I or my wife get an offer almost weekly. It’s rather disgusting – and it’s not as if the MSU alumni association needs any money – anyone can join the MSU alumni association…it’s not just for graduates. And membership costs a damn fortune.

  11. taney71 says:

    I actually got a card from my University so I could do the no interest transfer. Worked well for me since I will have paid 6,000.00 off by the end of this year. After that is done I am cancelling the account.

  12. mac-phisto says:

    unholy relationship there.

  13. Derv says:

    Yes, well, Liberty University is HigherOne’s bitch. It’s probably the worst thing to happen for naive little college students, and is WAY worse than the guy offering to give you a T-shirt to fill out an application.

    We get the privilege of having a “debit” card which functions as our school ID and is required to be carried at all times. Of course, in return for all that free mastercardage, HigherOne is a fee nazi. Request a paper statement? $3.00 Lose your card? $30.00 Need to withdraw more than $500 of YOUR money? $5 or 2%! Overdraw? $35 Do nothing for 9 months? $19.00 inactivity fee! Need a check? $10

    What’s more… you can’t opt out. I asked for a plain student ID, and they said “well you can just not use it…” Unbelievable…

  14. Derv says:

    @taney71: Don’t do that. Your credit score will go down. Just cut it up and don’t use it.

  15. mac-phisto says:

    @backbroken: why just pick on the penn staters there? must be a pitt grad.

    nough said.

  16. taney71 says:

    @Derv: Why does my credit score go down if I cancel a credit card?

  17. Derv says:

    @taney71: It messes up your credit utilization ratio. Read this article for more: [money.aol.com]

  18. farker says:

    I like the approach the University of Houston has taken. They are partners with HigherOne as well, but you are issued a UH Master-Card debit card which also functions as your student ID. This is called your Cougar 1Card.

    The 1Card can remain merely your student ID, or a student can opt-in online to use it as a regular debit card by linking it to an existing checking account.

    Also, the card can be used for on-campus meal plans, as well as refunds from textbook buybacks, or receive their student financial aid through their 1Card account.

    All in all, it seems a more responsible way of teaching students to handle plastic, without the burden of extending credit to them. Hopefully good money-handling skills with a debit card will lead to better experiences with true credit cards in the future.

    (All that being said, I got my first credit card when I was 16, still under the supervision of my parents, and learned how to handle credit wisely.)

  19. thelushie says:

    @Derv: Marshall University is also one of Higher One’s bitches. Don’t forget the fee for checking your balance at an atm not owned by Higher one. of course, there are only two of those, both on campus, one in a dorm not accessible unless you live on campus!

  20. mac-phisto says:

    @farker: doesn’t it bother you that essentially by attending the university, you are being automatically enrolled in a bank’s marketing list though? & as part of that relationship, all of your personal data is being transmitted to a 3rd party (as well as the bank’s 3rd parties, as they see fit)?

  21. Derv says:

    @farker: In theory, this sounds nice. In an ideal world, college students would never get hit with fees because they would be perfect at managing their accounts. But we are not in an ideal world, and college students are IDIOTS when it comes to managing money, myself included. I have about $30 bucks in my local checking account, and instead of, oh, saving it, I went to Arby’s and got a milkshake. And thats OK; I have a paid-for car and no real financial burdens right now. HOWEVER, many students would do exactly what I just did, but have much bigger financial burdens (loan debt). If a student messes up with their checking account somehow, that $30 bucks that I have left could go straight to pay some made-up fee. In fact, HigherOne tried to swindle me out of some cash the other day. I have only ever had ONE deposit to the account; a financial refund. The overdraft fee is $35.00. My account balance was $-29.00. That doesn’t even make any sense! If I truly overdrafted, I would’ve had at LEAST a $-35.01 balance. I called them up and HigherOne had the balls to tell me that they would refund it as a courtesy, and that I should’ve known that some grocery stores run a credit authorization through twice, and even if it doesn’t go through, it can cause me to overdraw. A complete crock, especially when they charge you $2.00 to check your balance at an ATM and have no phone number you can call on the back of the card to get a balance. They prey off of poor, naive (about money at least) college kids to make a buck. It’s disgusting!

  22. bohemian says:

    Is there an industry or institution that isn’t a corrupt mess these days?

  23. taney71 says:

    @Derv: Thanks!

  24. Pipes says:

    @backbroken: Psh, Penn State is awesome. I may be one of their alumni that legitimately can’t understand math (ALWAYS had a problem with it) but hey, I’m 24 and making 6 figures, and I got my job partly because of where I went to school, so I’m not complaining too much that I can’t do integers. Tuition, on the other hand…that I can complain about. One of the highest in-state tuitions for public, state-associated schools in the country. You should be getting more out of your lousy BoA deal, PSU!

  25. backbroken says:

    @mac-phisto: No. Definitely NOT a Pitt grad. Lehigh and Hopkins. I just find it’s really easy to get under the skin of the PSUers.

  26. Norcross says:

    We get them all the time for my wife, from both her undergrad, her law school, and the bar association. The funny thing is that they should KNOW how much her student loans are, and run far, far away.

  27. Bearcat44 says:

    “Bank of America has been trolling across college campuses.”—Fixed for your pleasure.

    I remember the days when I received lots of MBNA/WSU alumni association propaganda wanting me to sign up for a CC. I’m still upset that WSU has a deal with these jagoffs, even with the student lists being removed.

  28. lihtox says:

    College kids don’t always understand what it means when a 4.9% introductory APR automatically soars to 18.24% after six months.

    IMHO, if the APR makes any difference to them, then they’re doing it wrong. A credit-card balance is a measure of last resort.

  29. krunk4ever says:

    Are we criticizing schools and credit card companies making deals, schools providing student information to credit card companies, or both?

    The only problem I have is that schools are providing information about their students w/o their knowledge/consent.

    However, I have NO problems with schools and credit card companies making deals, just like I don’t have problems with schools and DMV/DOL (dept of motor vehicles/dept of licensing) making deals to get school branded license plates.

    I don’t see why having a school logo and advertising that card would make it craven/immoral… If the school doesn’t offer that school branded credit card, it’s not like students will decide not to use a credit card. They’ll just apply for a different one.

  30. slowinthefastlane says:

    “Fakey Fakerson” got a lot of free T-shirts in his college days. No need to put a real person down on the credit app.

  31. t325 says:

    University of Missouri Rolla is the bitch of just about every bank out there. I remember when I lived in the dorms, every single person got applications for a Chase card in the mail. We didn’t get one, or two, or three. But EIGHT over the course over just a couple days. Just in case the first 7 times they couldn’t convince us. Not to mention all of the free Dominos or Subway if you signed up for a Citi credit card.

    The alumni association is more up front about asking for money though. They don’t make deals with the devil aka banks. They just ask us up front. They bribed us graduating seniors with free pizza and beer to listen to a spiel about giving them money (which I went to, since I don’t pass up free pizza and beer) and in the diploma cover I got when I walked across the stage at graduation, there was a nice letter from the chancellor asking us to give. At least let us get jobs and get our first paycheck first for fucks sake.

  32. dizzie386 says:

    Every year at my school (University of Mississippi) BoA has been trying to pawn off their high rate cards on unsuspecting students. It’s really sleazy IMO. They usually start off at the Union for the first week while welcome week is going on, giving free t shirts, then they move along to Papa John’s where they offer a free small pizza.

    It USED to be MBNA here, but they have been bought out or taken over by BoA.

    That’s just people sent to try to get people to sign up for cards… I get at least 1 credit card or loan offer every day the mail runs. It’s usually 2-3. I’m a senior now.

  33. mac-phisto says:

    @backbroken: lol. it’s all good.

  34. lauy says:

    As a FORMER longtime BofA employee, I can assure anyone who thinks that MBNA became BofA’s whore is incorrect. MBNA is still running the show in the Card Services division. Most of the MBNA management is still in place, and slowly many of BofA’s employee friendly environments are being overtaken by MBNA’s uppity policies. I know I hated MBNA before they were acquired by BofA (I had a credit union credit card sold to them), and when I became one of them the loathing grew more.
    MBNA is most concerned about catering to high value consumers, of whom most people that regularly use credit are not. They love the college apps because they play the odds a college grad will remain loyal and bring them money down the road once in a career. I encourage anyone who has a BofA credit card to get out. Do I have an axe to grind? You bet. I am a former employee for a reason.

  35. mac-phisto says:

    @krunk4ever: the marketing is what really irks me. i remember when i was in school, the alumni card was advertised in the introduction packets, card booths for all types of cards were set up all over campus – specifically in high traffic locations (meanwhile, students/student groups were relegated to specific “free speech zones”), i even remember walking into classrooms to find card offers on every desk before class.

    there’s a point where it simply becomes overwhelming. & considering some commenters have already pointed to co-branded student ids/debit/credit cards, one has to wonder if the schools really have the interest of their students in mind, or if they just look upon them as revenue sources.

  36. Hongfiately says:

    Interestingly enough, I used this very thing to get out of debt after I graduated. I moved home after graduation to save money and work to pay off the $10,000 that I owed to both First USA and Citibank. One day I received a 0% balance transfer offer from MBNA proudly offering me a University of Texas Arlington Alumni Association credit card. That combined with a 9% holiday loan from my bank reduced my interest rates from 29.9% on both balances and I blew the debt out in about a year. My experience is NOT typical — I got the offer after I had already over-extended myself.

  37. @ChuckECheese:

    Having graduated from Wash U 5 years ago, I can say “lots” of solicitations wound up in my mailbox.

  38. 310Drew says:

    “Credit isn’t a bad thing, but the credit cards pushed through these exclusive arrangements are burdened with abusive terms. College kids don’t always understand what it means when a 4.9% introductory APR automatically soars to 18.24% after six months. Colleges have a responsibility to promote good financial habits while protecting their students.”

    So college students cannot understand basic math? That is whats wrong with this country ! These idiots that do not understand the word introductory do not belong in college, they belong serving me fries at mcdonalds!

  39. DePaulBlueDemon says:

    My school just joined within the last 6-8 months…

  40. xman31 says:

    “Colleges have a responsibility to promote good financial habits while protecting their students.

    No they do not. I’m in college right now, and I do not expect my school to “protect” me from credit card companies. I applied for the cards (3, 1 main one for the reward points, 2 for backup. No balance ever carried on any of them), and I choose to use them. College students are adults who should be responsible with their money (and debt). Parents should be the ones to “promote good financial habits” when kids are younger so they don’t fall into the traps that many American have!

  41. cotr says:

    our IDs are also wachovia debit cards that you have to opt in to use. there is a wachovia branch every half a mile and numerous on campus ATMS. the accounts that students get are fee free except for the dreaded NSF.

    on the other hand, the alumni assoc is owned by BoA and peddles a MC all the time.

  42. PinkBox says:

    Ha. They gave my boyfriend a 5k limit when he was in college. He didn’t even have a job at the time.

  43. acknight says:

    This’s long been a MBNA practice, long before BoA bought them.

  44. Jubilance22 says:

    I’m a Univ of Minnesota alum, and I graduated in 2004. When I started school back in 2000, stopping by the local TCF Bank branch was apart of the orientation schedule, and you could get your U Card (student ID) linked to your acct if you wanted. I never got any pressure to get a credit card from them though. Instead I went the dreaded “fill out these apps to get a t-shirt!” route.

  45. Jozef says:

    Add Georgia Tech to the list. They keep sending me BoA credit card application every three months or so.

  46. RogerDucky says:

    Yup! My school has one too!

    Bank of America’s alumni-branded credit cards, aside from paying the schools lots of money, also gives the alumni associations another added benefit:

    The ability to have a relatively updated address of each and every one of the people with the credit cards.

    How do I know?

    I didn’t bother to update the address info with the alumni association when I moved. However, I did update the alumni credit card’s address, since I wanted to have my bills sent to the right place. Guess what? None of the alumni association’s mailings were sent to the old address after that — they all got to the new address automagically.

  47. SuffolkHouse says:

    Who should we call? Who can we complain to?

    Give us phone numbers and email addresses.

    Aren’t we building a critical mass of pissed people here? Can’t we all start doing something about this bullshit?

  48. NotATool says:

    If I were Ohio State faculty or staff, I’d be lawyering up and filing a class action harrasment suit against tOSU. Your employer sells your name and address to a credit card company? WTF is that?

  49. enm4r says:

    Until signing up for a credit card no longer requires the individual TO ACTUALLY SIGN THEMSELVES UP, I think this is just yelling for yelling’s sake. College students are grown ups, so if they expect all the rights and privileges they better be ready to accept the responsibilities.

  50. TheFlamingoKing says:

    God forbid we expect college students, ones that are headed towards an additional 4+ years of education in all disciplines of study, to understand a difficult concept like interest calculation.

    How many of those same kids are business or finance majors? How many are in engineering, science and math? How many are getting a BS instead of a BA, where more math is usually required? Yet, we need to protect these people from having to do some math you learned back in middle or high school?

    Sorry, no. Take responsibility for yourself for once. If your complaint is “the alumni association sends me too much junk mail” then that’s fine, I get that too. But “the alumni association has a responsibility to keep me from signing up for a bad credit card?” So long personal responsibility…

  51. iMike says:

    Slight improvement in accuracy of the original story: MBNA built the affinity card business, including that targeted at college student and alumni groups.

    BOA bought MBNA in 2006.

  52. incognit000 says:

    I used my school’s credit union. Why? Because it has a record of superb service and responsible lending policies going back to it’s founding.

    I think that other schools should follow the University of Wisconsin’s lead and construct their own school credit unions, which will permit them to prevent their students from racking up debt as well as permit them to keep all the profits THEY earn, as opposed to being at the whim of an outside bank’s kickbacks.

  53. TouchMyMonkey says:

    @Derv: It shouldn’t matter, but apparently it does. Oh well. I suppose for the sake of making sure I get the best rate when I go car shopping a few years from now, I’ll hang onto the Capital One card I’ve held for the past six years or so. That is, until they piss me off. If they don’t fuck with me, I won’t fuck with them. Of course, I pay my balance in full every month, so it oughtn’t matter that my APR is 13%.

    Now, I have long held the opinion that having one’s school logo on a card is a pretty dumb reason to get one. I want to see the numbers, and if they suck, well, there are lots of other ways I can support my alma mater.

  54. mac-phisto says:

    @TheFlamingoKing: they don’t have a responsibility to keep you from signing up for a card – that’s not the argument here. more along the lines of: do they have to facilitate it? what are the perceived benefits to the members & potential members? do the benefits outweigh the costs (real & perceived)?

    personal responsibility is a good thing for individuals, but it’s not meant to act as a shield for organizations that make poor decisions on behalf of their members, & imho, that’s the real issue here. programs such as this create a conflict of interest for the organizations that erodes their core missions. directors should be protecting the interests of their members when entering into contracts with 3rd parties & to be frank, i don’t think they were.

  55. dry-roasted-peanuts says:

    Sorta. My alum card was done by MBNA, but then they were acquired by Bank of America.

  56. Daniels says:

    I am also in the boat of having an MBNA Alumni card that was converted to BofA.

    I guess I’ll be the crazy guy that says they’ve been a good card for me. I’ve done some balance transfers and emergency things on to the card so I guess I carry enough of a balance occasionally to be a good customer.

  57. My school’s alum association does this.

    I won’t get the card.

  58. alexanderpink says:

    Hmm I don’t know if my alma mater (Rice) does this. I have never gotten a card offer from them, do not recall credit card companies on campus, and have not heard of a school branded card. Crazy that schools allow these companies on campus to that extent, though I suppose money is hard to turn down.

  59. SinisterMatt says:

    “Colleges have a responsibility to promote good financial habits while protecting their students”

    I would have to take exception to this. I think that college students should know something the basics of lending before they come to college. The University is not a babysitter or a parent, for Pete’s sake. Yeah, they are in the business of education, but not that kind of education.

    Nevertheless, should credit card companies do this? Absolutely not. It’s predatory and exploitative, precisely because parents don’t teach their children about credit. It makes me angry to see them on campus luring students with their offers of free Subway sandwiches or t-shirts.

    Cheers!