Household HSBC Watch

Why is predatory lender HSBC looking at college students and UMUC?

Having saturated the working adult population with credit card offers, credit card companies are now banking on a new market: college students. Under regular credit criteria, many students would not be able to get a card because they have no credit history and little or no income. But the market for young people is valuable, as industry research shows that young consumers remain loyal to their first cards as they get older.

Nellie Mae, the student loan agency, found that 78% of college students had credit cards in 2000. Credit card companies have moved on campus to lure college students into obtaining cards. Their aggressive marketing, coupled with students’ lack of financial experience or education, leads many students into serious debt.

Undergraduates with credit cards carried an average balance of $3,071 in 2000. (Source: National Postsecondary Student Aid Study)

Half of all college students with credit cards don’t pay their balances in full every month.

58% of college students reported seeing on-campus credit card marketing tables for two or more days within a one month period at the beginning of the semester.

On a test of personal finance skills administered to high school seniors, students averaged a score of 57%, an F on any grading scale. Only 5% of the seniors scored a C or better.

If you believe you are the victim of unfair interest rate charges, late fees or other penalties, or deceptive marketing, and the credit card company fails to address your complaint, file complaints with your state Attorney General’s office and the national Office of the Comptroller of the Currency:
- visit: www.occ.treas.gov/customer.htm
- call: 1-800-613-6743, (M-F 9am-3:30pm CST)
- e-mail: Customer.Assistance@occ.treas.gov
- fax: 1-713-336-4301 or;
- mail: Customer Assistance Group 1301 McKinney Street, Suite 3710 Houston, Texas 77010

Computing the Interest Rate:

The adjusted balance method is the most consumer friendly: interest is charged on the account balance remaining after payments and credits during the billing cycle. The average daily balance method is charges interest on your average balance during the billing cycle.

The one to watch out for is the two-cycle balance method, where the interest on your average daily balance is computed using both your purchases from that billing cycle and those from the month before.

“If I charged a bunch of things in February, even if I paid them off completely, that figure would still be used along with my March purchases in order to calculate my average daily balance for March,” said Brad Dakake, a consumer advocate at the Massachusetts Public Interest Research Group (MASSPIRG). “The average consumer probably has no idea – it’s very sneaky.”