Colleges hit credit card payers with junk fees
Filed under: Money College, Debt
For nearly every business on the planet, the 2% fee charged on credit card payments is just another cost of doing business.Not so for colleges, which are implementing policies that pass that fee on to their students and the parents who pay tuition. The USA Today reports that "Starting Wednesday, students at the University of Southern Maine who pay tuition using plastic will face a 2.75% processing fee. Other schools that have adopted, or are adopting, similar policies include George Mason University, Northwestern University, Wichita State and the University of Virginia."
Colleges that don't have these fees are seeing some savvy parents dropping 5-digit college expenses onto credit cards and then paying them off immediately -- stumbling into a airline miles bonanza in the process. On the other hand, rising college costs have some students putting their college tuition bills on their credit cards. In 2008, students charged an average of $2,200 in educational expenses to credit cards, up 134% from four years earlier, according to Sallie Mae.
Now those students will be in for a Supersized college ripoff: Lacking the cash to cover their expenses, they'll put them onto their credit cards -- and pay $200 in extra fees for the privilege.
But the college don't really care about that -- They just want their money.
Reader Comments (Page 1 of 1)
7-01-2009 @ 5:40PM
Alex said...
This article has an extremely misleading headline: "Colleges hit credit card payers with junk fees".
This is not a "junk" fee. This is a very reasonable fee reflecting the cost of the transaction to the university. If you pay with a check, the transaction is free. Before disallowing credit card payments a few years ago, my university was paying nearly $1 million a year (about $100 per student) on credit card fees. Why should that be rolled into the tuition?
"For nearly every business on the planet, the 2% fee charged on credit card payments is just another cost of doing business."
This is true of small transactions, but not large ones. You can't put a home down payment on a credit card or pay in full for a car on credit card (or if you did for a car, I guarantee the dealer would give you a discount if you instead paid by check).
Finally, the statement "rising college costs have some students putting their college tuition bills on their credit cards" is also not true. Sure, college costs are rising. But students should not be putting educational expenses on credit cards: getting a student loan is much cheaper (in terms of interest rates and up front costs). Using a credit card for these types of expenses is a mistake that credit card companies were happy to profit from.
"But the college don't really care about that -- They just want their money."
This is exactly the wrong conclusion. Students/parents don't want to be sending $200+ to the credit card companies. Students/parents don't want to be wasting their money on bad loan "products" as they are paying for college.
As a college loan, credit cards are a terrible option: they have a 2-3% origination fee and high interest rates. I don't want my university subsidizing that.
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