“New Credit Cards for Student Loan Borrowers”
This past week, Sallie Mae (a student loan lender and servicer) came to market with three new credit cards geared toward college students and recent graduates. Yes, you read that correctly. People already saddled with eye watering amounts of debt are being offered a chance to go into even more debt. How exciting! To me, this shows what Sallie Mae’s true intentions are and once again shines a negative light on student loan servicers and their ultimate goal. I’m all for companies generating a profit and being able to remain in business, however when it is masked as “help” for their customers is when it should be addressed.
What Do These Cards Offer?
So what is so great about the new cards offered by Sallie Mae? The three different cards offered (Ignite, Accelerate, and Evolve) have cash back rewards from 1% to 1.25% and bonuses on these cash rewards for either on-time payments or if they are used to pay down student loan debt. I can see why this might seem attractive to the average consumer, but what they don’t see is the fine print on each of these cards.
The Fine Print Is Important
After the 0% interest rate introductory period of 6 months, the APR charged is anywhere between 14% to 24% depending on the individuals credit rating. Additionally, there are significant fees for late payments, cash transfers, or balance transfers. The rewards themselves are actually not that much better than what other current cards offer, but by branding them as cards for “student loan borrowers” their hope is to appeal to this audience and ultimately make more profit on the individuals who end up not paying their card on time.
How do Credit Card Companies Make Money?
This is probably the reason why these new cards upset me the most. The reality is that an individual who takes out one of these cards and always pays their bill on time at the end of every month is not nearly as profitable to Sallie Mae as someone who consistently misses their payments OR only pays the minimum balance each month. The 14% to 24% interest rates are where MasterCard and Salle Mae will make their most money and this is the exact opposite of what a student loan borrower, with significant debt, needs.
If you, or someone you know, is saddled with student loan debt then reach out to our Certified Student Loan Professional (CSLP) to discuss what options you have!
October 18th, 2019