College credit card agreements pay millions to snare students
Credit card companies pay colleges millions of dollars for the right to market their cards on campus. A Federal Reserve report on college credit card agreements said that Bank of America was by far the most aggressive, paying colleges and alumni associations $62 million in 2009. The Fed report is part of a Credit Card Act provision passed earlier this year requiring credit card companies to disclose how much they pay schools to market their products.
College credit card agreements
Credit card companies paid a total of $83.5 million to colleges in order to recruit card holders on their campuses. That money netted 53,164 new student credit card accounts, according to the Fed report. The University of Notre Dame got more money than any other school from Chase Bank USA, which paid $1.8 million and ended up with just 77 new customers. FIA Card Services, the credit card arm of Bank of America, paid $1.5 million to the University of Southern California to net 659 new accounts.
Loan card rakes in penalty fees
A controversial credit card that started appearing on college campuses this year is called Higher One from MasterCard. It’s called a “loan card” to circumvent new credit card rules that prohibit such things as charging customers for inactive accounts. Higher One was created to make money off students’ financial aid. But card holders are charged a $19 monthly penalty for accounts that aren’t used for nine months. Higher One racked up $27 million in sales in its most recent quarter. More than three-quarters of that money came from fees charged to merchants and students.
Big banks on campus
The Fed report on college credit card agreements collected information on 1,044 campus deals made by 17 credit card companies. Bank of America’s FIA, U.S. Bank and Chase own 96 percent of all the college credit card agreements in 2009. FIA led all card issuers with 906 separate agreements that account for 1.61 million student credit card accounts.