Earlier this year, the state legislatures in Texas, Oklahoma, and New York voted to clamp down on credit-card marketing to college students.Ĭongress plans to hold hearings on the companies' practices later this year.
Some 20,000 people currently hold the card, including students, alumni, professors, and other staff.Īs a growing number of college kids pile up mountains of credit-card debt, the entire issue of credit-card companies on campus is coming under increasing scrutiny. Tillar, vice-president for alumni relations at Virginia Tech. "Hopefully card-users feel that they get more special care," says Thomas C. The alumni association at Virginia Tech, which oversees the relationship with Chase, says its affinity card helps students and alumni build credit histories with unusually good service. With affinity cards, the schools get income that they otherwise wouldn't, while alumni and students get the option of signing up for a credit card. If Ohio State, with the nation's largest enrollment at 59,091, signed a similar deal, it could be worth more than $22 million.Ĭard issuers and schools say that these relationships are mutually beneficial. The University of Tennessee, which raised eyebrows with a $16 million deal in 1998, recently signed a pact with Chase worth $10 million - roughly $384 per student at a school with a total enrollment of 26,038. And in most cases the worse the card terms are for students and alumni, the more profitable they are for the schools.Īt a time when state support for higher education has languished, these contracts have become major sources of cash for universities. Schools, especially public universities supported by state revenues, are coming under increasing financial pressure to generate new revenue these days, and deals with credit card companies can provide a steady stream of income. The deals can be worth nearly $20 million to a single university. Nearly every major university in the country has a multi-million-dollar affinity relationship with a credit card company. Leech isn't just taking on Virginia Tech, which takes in seven figures from the Chase deal. "But these contracts are really money-makers for the school, and not about services to the students." "Students assume that if the university has an affinity contract with a bank to offer a credit card, the university will surely look after them," she says. But Leech warns that schools that get money from credit card companies through affinity contracts or other marketing agreements face intractable problems, in which the school's financial interests are in direct conflict with those of students and alumni. Chase ultimately dropped double-cycle billing on the Virginia Tech card, as it did for all cards earlier this year. First in a limited way and now more broadly, she has been speaking out against the conflicts of interest that universities face when they strike business agreements with credit card companies. The experience convinced Leech that it was time for her to take a stand. Among other things, the card had what's known as "double-cycle" billing, where interest is calculated over two months instead of the typical one, resulting in higher finance charges. Behind the card's shiny surface, featuring the football stadium at sunset, the so-called "affinity" card offered some of the most unfavorable terms around for card users. An associate professor at Virginia Tech who specializes in consumer affairs, she read the terms of the credit card that her school, together with JPMorgan Chase, was marketing to students, alumni, and staff. It was three years ago and Irene Leech still remembers the shock clearly.
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