2008 Woodie Awards
Baruch's smart financial practice
Anittah N. Patrick
Issue date: 10/14/08 Section: Opinion
Silvia Garces' "Baruch's bad business practices" opinion piece in the Oct. 6 issue of The Ticker articulated what a lot of us at Baruch are probably thinking: Why can't I charge my tuition anymore? But as frustrating as it might be to no longer be able to charge it without a 2.65 percent transaction fee, it's actually better for all of us in the long run.
First, Garces asks a great question: "Where are all these additional fees going?" Every time you use a credit card, whether it's at Baruch or at the deli, a percentage of your purchase goes to the network (e.g. MasterCard) and another percentage goes to the issuing bank (e.g. Chase). When Baruch didn't charge a transaction fee for credit card charges, they only got to keep 97 percent of our tuition bill. So this fee is actually a good business practice for Baruch in strict dollar terms.
More importantly, Garces notes she doesn't qualify for financial aid. But there are private student loans for even those of us who don't qualify for federal student aid or loans. Take out a $10,000 private student loan today, for example, begin repaying it immediately, and if you make your minimum monthly payment of $85, then in 20 years, you'll have paid just over $20,000.
Compare that to self-financing with a low-rate credit card. In order to pay off the same amount over the same time frame on the kind of credit card that most students would qualify for, you'd have to make a minimum monthly payment of $132. In this simple example, financing your tuition with your credit card is, dollar for dollar, 36 percent more expensive than financing with a private student loan.
Figure you'll land a sweet job and be able to pay off a big chunk of your debt? Hey, more power to you. The interest you're accruing on your credit card will always (unless you have five or more years of excellent credit) outpace the interest on your student loan.
Given this, it almost seems like Baruch's fee is a service. Now, we have a disincentive to simply whipping out the plastic. We're so trained to want convenience now, not thinking about the future (the credit card industry and the consumerist American machine have spent billions to encourage our bad spending habits) that sometimes we need road bumps like the 2.65 percent fee to pause and think about how we're paying for stuff.
But a moment of thought now can mean a lot of money saved over the long, or even medium, haul. And that, to me, isn't bad business practice, but smart financial practice.
First, Garces asks a great question: "Where are all these additional fees going?" Every time you use a credit card, whether it's at Baruch or at the deli, a percentage of your purchase goes to the network (e.g. MasterCard) and another percentage goes to the issuing bank (e.g. Chase). When Baruch didn't charge a transaction fee for credit card charges, they only got to keep 97 percent of our tuition bill. So this fee is actually a good business practice for Baruch in strict dollar terms.
More importantly, Garces notes she doesn't qualify for financial aid. But there are private student loans for even those of us who don't qualify for federal student aid or loans. Take out a $10,000 private student loan today, for example, begin repaying it immediately, and if you make your minimum monthly payment of $85, then in 20 years, you'll have paid just over $20,000.
Compare that to self-financing with a low-rate credit card. In order to pay off the same amount over the same time frame on the kind of credit card that most students would qualify for, you'd have to make a minimum monthly payment of $132. In this simple example, financing your tuition with your credit card is, dollar for dollar, 36 percent more expensive than financing with a private student loan.
Figure you'll land a sweet job and be able to pay off a big chunk of your debt? Hey, more power to you. The interest you're accruing on your credit card will always (unless you have five or more years of excellent credit) outpace the interest on your student loan.
Given this, it almost seems like Baruch's fee is a service. Now, we have a disincentive to simply whipping out the plastic. We're so trained to want convenience now, not thinking about the future (the credit card industry and the consumerist American machine have spent billions to encourage our bad spending habits) that sometimes we need road bumps like the 2.65 percent fee to pause and think about how we're paying for stuff.
But a moment of thought now can mean a lot of money saved over the long, or even medium, haul. And that, to me, isn't bad business practice, but smart financial practice.
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