College students with credit cards carry an average debt of $2,748, according to a report released last month by the U.S. General Accounting Office.
The federal report cited three surveys, including one by the Nellie May Foundation, which found that about 78 percent of all college students own one or more credit cards.
"We're pretty disgusted with the way these companies are preying on students," said Shannon Lumpkin, director of the UNM chapter of the Public Interest Research Group. "You can see it really badly the first week of school when these credit card solicitors will do anything to hook students. They've saturated the adult market and are now just targeting college kids."
PIRG state chapters released a report last year, that cited on the Nellie May Foundation survey and its own interviews with 460 college students within the first month of either the fall or spring semester of 2000-2001. It found that:
l One third of students received their cards through mail solicitation and one quarter from campus displays.
l Half of the students pay their balances in full, 36 percent sometimes do and 14 percent never do.
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l Almost 50 percent of students with one or more credit cards have paid a late fee and 7 percent have had a card cancelled due to late or missed payments.
l One third of the students surveyed have applied for a credit card at a campus table. Of these, 80 percent cite free gifts as the reason for applying.
l Only 19 percent of the students are certain that the schools have resources for instruction about responsible credit card use. Three out of four said they have never used these resources.
"You basically have a situation where students are lured in by free gifts and promotional materials, and they never realize the downside to the credit industry until it is too late," Lumpkin said.
The PIRG report also found that credit card companies used more stringent terms and conditions for students.
The survey found that the average student penalty rate was 22.84 percent, eight points higher than the average penalty rate, and is triggered by as little as one late payment or a late payment to another creditor.
The PIRG report also found that the average grace periods for most cards were 22.6 days, with five cards offering no grace period.
"These aren't exactly good cards either - you basically are being targeted for being a student," Lumpkin said. "We know that students will always turn to credit cards and just want mechanisms in place to help students handle it all responsibly, and, don't want them to be taken advantage of."
Lumpkin said she also was really concerned with what the PIRG report called "misleading and deceptive practices."
The report stated that credit card companies use low, short-term introductory rates to mask higher regular interest rates. The report found that the average introductory annual percentage rate was 4.13 percent and jumped 246 percent to an average of 15.04 percent.
The report also found that most companies only state in fine print that students who do not qualify for the offered card will receive a lower-grade card with higher interest rates.
"You get distracted by the toys and don't really see enough substance," Lumpkin said. "You think that you are getting great rates, but once students fall behind with these cards, the fine print they never saw makes it harder for them to climb their way out. It just isn't a good way for them to start their college career."
