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)
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Comments:
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.
@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.
I just received a credit card offer from my alumni association. It is a BOA credit card. I promptly shredded it.
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.
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 inlord that hat with the Bruin needed to be mineand 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 cant pay for it in a month, I just cant afford it.
-Anonymous
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?
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?!?
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
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.
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.
unholy relationship there.
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...
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.)
@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!
@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)?
@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!
Is there an industry or institution that isn't a corrupt mess these days?
@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!
@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.
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.
"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.
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.
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.
"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.
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.
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.
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.
@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.
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.
Having graduated from Wash U 5 years ago, I can say "lots" of solicitations wound up in my mailbox.
"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!
My school just joined within the last 6-8 months...
"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!
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.
Ha. They gave my boyfriend a 5k limit when he was in college. He didn't even have a job at the time.
This's long been a MBNA practice, long before BoA bought them.
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.
Add Georgia Tech to the list. They keep sending me BoA credit card application every three months or so.
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.
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?
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?
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.
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...
"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.