Colleges ink lucrative credit card deals
By Daniel Pannone
Issue date: 10/3/07 Section: Features
A recent article "The Dirty Secret of Campus Credit Cards" by Jessica Silver-Greenberg in BusinessWeek detailed the agreements between colleges and banks to offer and market affinity credit cards to students, professors and alumni. These affinity cards commonly display the university name and picture a building or design from the school. The agreements, while not necessarily directly through the college but rather through alumni associations, present concerns about whether the wellbeing of the students is being taken into account when these deals are made.
While these agreements may be common and unsuspecting, what is shocking is the exorbitant fees the colleges collect from them.
According to the article, many colleges have multi-year contracts worth up to $20 million. For example, the University of Tennessee signed an agreement that could total $10 million in revenue for the school with Chase (part of JPMorganChase) over the course of the deal. These deals include revenue for the bank's right to student lists and marketing on campus. They also include royalties in the form of a fee for each card issued to a student, as well as revenue for the amount of spending done on the cards.
But if it appears that the colleges are raking in the money, the banks also have much to gain. For example, a University of Chicago College & University Alumni Card listed on Chase's Web site offers a 0 percent APR for the first 12 billing cycles, with a minimum 14.24 percent APR afterwards. It also has significant penalties for default or late payment.
The default APR is 32.23 percent and the late payment fee is $39 for balances of $250 and over. Furthermore, a Cornell University Student Card listed on Chase's Web site offers 0 percent APR for the first six billing cycles before increasing to 18.24 percent. The Cornell card also has a further enticement: Chase will make a contribution for every purchase made on the card to support scholarships and alumni programs for Cornell.
While these agreements may be common and unsuspecting, what is shocking is the exorbitant fees the colleges collect from them.
According to the article, many colleges have multi-year contracts worth up to $20 million. For example, the University of Tennessee signed an agreement that could total $10 million in revenue for the school with Chase (part of JPMorganChase) over the course of the deal. These deals include revenue for the bank's right to student lists and marketing on campus. They also include royalties in the form of a fee for each card issued to a student, as well as revenue for the amount of spending done on the cards.
But if it appears that the colleges are raking in the money, the banks also have much to gain. For example, a University of Chicago College & University Alumni Card listed on Chase's Web site offers a 0 percent APR for the first 12 billing cycles, with a minimum 14.24 percent APR afterwards. It also has significant penalties for default or late payment.
The default APR is 32.23 percent and the late payment fee is $39 for balances of $250 and over. Furthermore, a Cornell University Student Card listed on Chase's Web site offers 0 percent APR for the first six billing cycles before increasing to 18.24 percent. The Cornell card also has a further enticement: Chase will make a contribution for every purchase made on the card to support scholarships and alumni programs for Cornell.
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