The Money Compass: Where Your Money Went and How to Get It Back

Chapter 4

Credit Cards

Let Me Have it NOW! And They Did

Credit is a system whereby a person who can not pay gets another person who can not pay to guarantee that he can pay.

—Charles Dickens1

At one time, only the very rich used credit cards and the best the rest of us could hope for was to have a gas station credit card. Gas station credit cards allowed you to buy gas at your favorite service station. What a privilege! But times do change. Now everyone who can get a credit card has one or two, or four of them, and banks have a stronger revenue stream. Many consumers get sucked into using credit cards without thinking of the financial consequences. The credit card companies’ (i.e., banks) direct mail make it enticingly easy to apply for credit cards, and it is even easier to apply online. College campuses have students hawking credit cards on campus streets along with a free T-shirt for signing up for a card. Of course, universities also get a “kickback” for allowing these activities on their campuses. Everyone wins—well, not quite.

Pay to Play

The CARD Act requires credit card companies to disclose the details on how much they pay to colleges for the rights to market their cards to students and alumni. The Federal Reserve’s first Report on College Credit Card Agreements was released Monday, showing that credit card issuers paid over $83 million to colleges and their related alumni organizations in 2009. The University of Illinois Alumni Association received the highest payment ...