When Shannon Warren signed up for her first credit card two years ago, she never thought she would have a problem paying it off.
“I’m a person who hates debt,” Warren said. “It gives me so much stress.”
And until this year, the junior French major was careful to pay off her balance in full every month. But then she used her card to pay for a trip to Brazil, and since then, she has only been able to make the minimum payment each month. By the time she can pay off the entire bill, interest rates will have made the total payment much higher.
Warren is not alone in her credit card woes. Through letters, phone calls and other promotional campaigns, credit card companies spend a lot of time directing marketing efforts at college students. And for many, the temptation of what seems to be “easy money” can be too much to resist.
But OSPIRG warns that fine print can hide behind the free T-shirts and gifts offered to students when they apply for a card — and high interest rates can send students into a spiral of debt that can be hard to escape.
And that’s why the Oregon Student Public Interest Research Group, in conjunction with the national PIRG campaign, is working to raise students’ awareness about credit card debt.
Credit card companies aggressively market credit cards to college students, said Melissa Unger, state board chair for OSPIRG.
“They target students because they know they’re more likely to go in to debt,” she said.
Unger added that many students sign up for a credit card without fully understanding the terms of the agreement. Companies make the credit card’s terms seem more favorable than they actually are, she said, by advertising an introductory annual percentage rate or APR, which generally lasts only a few months.
After this brief introductory period, the rates can increase dramatically, Unger said. And because APRs can vary widely, it is important to read the fine print on any credit card application.
According to a report OSPIRG released earlier this year, regular APRs can range from 7.99 percent to 30.25 percent — and OSPIRG has recommended students look for an APR near or below 15.04 percent.
Students should be wary of any credit card offer they have not fully researched, Unger said. In addition to knowing the regular APR, it is important to know what the penalty APR is — the higher interest rate a person is charged when a payment is missing or late.
“Know the APR, know what the late fees are, read the fine print,” Unger said.
Citibank spokeswoman Maria Mendler said her company has been marketing credit cards to college students for the past 20 years. The Internet has opened up more marketing avenues for companies to reach students. But Citibank’s credit card promotions aimed at college students are not deceptive, she said.
“We want our customers to understand the terms and conditions,” Mendler said. “We do believe credit education is important.”
Consumer information about credit card debt is available on the company’s Web site, she said. In addition, the company makes available pamphlets on debt, along with card information at campus sign-up tables.
Credit cards are safer than cash because they offer protection from theft and fraud, Mendler said. But students need to remember that they are as responsible for a credit card payment as they would be in a cash transaction.
“Credit cards should be used as a form of payment, not as an extension of income,” Mendler said.
Unger said she doubts credit education efforts by card companies have been sincere.
“If they were sincere, they would encourage students to read the fine print,” she said.
Instead, Unger said, credit card companies would prefer to leave students in the dark. At many campus promotions, there are no educational materials on credit debt available, she said, adding that she and other OSPIRG members would like to prohibit credit card companies from distributing promotional materials on campus without also handing out information on debt.
Unger said she does not want to discourage students from using credit cards. She simply wants to make them aware of deceptive tactics being used against them.
“I’m not saying that credit cards are bad or not helpful,” she said. “I’m just saying that credit card companies are trying to take us for all that we’re worth.”
For Warren, the consequences of her credit card use have been a mixed bag.
Having a credit card has allowed her to travel and take advantage of opportunities she might not otherwise have been able to afford, she said. But her credit card debt is also a constant source of worry — one she is anxious to erase.
“My number one priority after I finish school is to pay off my credit card debt,” Warren said. “In the future, I’m going to be much more careful.”