FTC in New York and John Jay College Teach Credit Smarts to NYC Students

"Get credit card savvy or get fleeced"

For Release

New York, NY -- The Federal Trade Commission's Northeast Regional Office and John Jay College of Criminal Justice of the City University of New York are teaming up to announce "Project Credit Smarts 2002" -- their latest initiative to educate students about responsible credit card use -- at a press conference on Tuesday, August 27th from 10:30 to 11:15 a.m. at John Jay College, located at 899 Tenth Avenue in Manhattan, between 58th & 59th Streets - room 625. In a move to compete with credit card companies for the attention of students, the FTC and John Jay will also distribute consumer education materials that morning at a table right next to the credit card vendors.

Over 850,000 students are now coming to the New York City metro area's colleges and universities -- over 190,000 as freshmen. These teens are targets for high pressure -- and sometimes unscrupulous -- credit card offers. Due to the great demand, the FTC in New York -- in partnership with John Jay College -- is expanding "Project Credit Smarts" -- a crash course for freshmen and other students on how to survive the high pressure tactics of credit card promoters. In the past year, the FTC has contacted over 60 area colleges and universities and provided them with educational materials and speakers to teach "Credit Smarts." At John Jay, FTC staff teaches Credit Smarts to incoming freshmen and distributes the FTC's ABC's on using credit, right where students use their credit cards: at the checkout of the campus bookstore. The success of last year's program, and the jump in credit card use by students, prompted the FTC to reach out this year to even more schools.

Credit card companies have implemented full-scale sales efforts aimed at students aged 16 to 18. Indeed, many companies duke it out on university campuses nationwide to sign up students. According to a recent study by Nellie Mae, a national student loan financing organization, 83% of undergrads have at least one credit card, the average credit card balance for college students last year was $2,327, and the median debt increased by 43%. In years past, these same students would not have been given credit cards, and certainly not without a co-signor.

Lisbeth Minoso, a former student at John Jay College who says her easy access to credit cards on campus drove her into debt, has a warning for other students: "I didn't realize until it was too late that I was only paying off the interest and not the debt. Over time, my interest rate went up, which I also didn't expect. Now, I owe almost $10,000. With bad credit, I can't get a law enforcement job."

"Credit cards are a student's double-edged sword -- useful to pay for school necessities, yet a hazard for those who are not credit savvy," says Barbara Anthony, the FTC's Northeast Regional Director. Anthony adds, "Freshmen are literally 'rushed' -- bombarded by marketers with aggressive offers of easy credit." Just look at what the typical freshman -- who may have no experience living on his or her own -- encounters:

  • Some companies set up tables on- or off-campus as school starts, luring students with goodies like "free" t-shirts, CD holders, toys and candy -- not so hot a deal when many card issuers charge an annual fee of $15 to $55.
     
  • Students hooked by initial low interest rates can incur crippling charges when rates go up.
     
  • If a student charges $2,000 on a card with 18.5% interest, and pays a low minimum monthly payment, it would take over 11 years to pay off the debt and cost an additional $1,934 just in interest -- almost double the cost of the original purchase.

Credit card debt can have a negative impact on students' academic performance. It can also negatively impact life after college. At John Jay, if students have large indebtedness and apply for a job, they are turned down because of bad credit. According to Dr. Roger Witherspoon, Vice President for Student Development at John Jay College of Criminal Justice, "The country, while dealing with national debt, is not dealing with personal debt, particularly that of college students."

College kids can get "credit smart" by remembering the following "plastic pointers":

  • Credit cards are just like a loan -- you have to pay back what you owe, plus interest.
     
  • Don't succumb to high-pressure sales tactics.
     
  • Check the interest rate, and watch out for low introductory rates that go up later.
     
  • Avoid snowballing debt by paying your balance in full each month.
     
  • Consult your financial aid officer about alternatives such as lower interest rate school loans and short-term installment plans with no interest. Sign up for a credit card awareness course on campus, if available.

And Credit Smarts is not just for students. With consumers feeling a bit helpless in the wake of recent business scandals and the plunging stock market, there's a way for all consumers to exercise control over their finances. Beth Kobliner, best-selling author and financial news commentator, will be on hand to offer consumer tips on how to control spending and debt.

The FTC toll-free Consumer Hotline is available for further assistance at: 1-877-FTC-HELP (382-4357). Or visit the FTC's website at www.ftc.gov.

Contact Information

FTC Media Contact:
Cindy Kapadia, Investigator
Public Relations Communications
(212) 607-2807
Staff Contact:
Michele Stolls
Attorney
(212) 607-2834

Barbara Anthony
Regional Director
(212) 607-2828
John Jay College Media Contact:
Jerry Capeci
(212) 237-8628