Marketing Credit Cards to College Students

Posted On: April 28, 2005

Vicky Hall
Date: 1/23/2001 9:23 am CDT

I think that it is terrible the way the credit card companies go after college students. My daughter is a senior in college and now has over $8,000 in credit card debt. She has been supported by her father and I throughout college, but was not given loads of spending money. We felt that although she would be strapped for money, she would have a debt free college education.

The credit card companies began soliciting to her and her peers by offering free merchandise just for signing up. At a time when they should be denying themselves the extra things (new clothes, etc.) they just use the card–it is easier than doing without.

My daughter is not self supportive and should not have been given credit. She has a 10 hour a week campus job. I know many young people with full-time jobs that can’t get credit.

I feel they are taking advantage of future income. Now my daughter–yes she is responsible for her actions–will be starting out with substantial debt and has no means of paying off the debt at this time.

Shouldn’t there be some type of protection for this group?

Board Monitor - CA
Date: 1/23/2001 2:31 pm CDT

Vicky,

Thanks for your post! You may find the 60 minutes special tonight (see post below), which touches on this very subject to be of interest. Card issuers have received a lot of criticism over their aggressive marketing techniques involving college students. I personally fell into the same trap when I was in college (I’m dating myself!). $8,000 is actually not to bad. I ended up with over $40,000 worth of card debt!

As for what’s being done about this…there is no organized effort that I am aware of to protect college students from the marketing efforts of card issuers. I speak at college campuses on occasion (am speaking at a local univ. next month) and warn students of the pitfalls of credit cards.

Please bear in mind, though, that cards can be very helpful to college students if they are used with extreme prudence. So, I don’t think that eliminating all marketing efforts is the solution. I think credit education is the solution. To that end, I strongly believe a course in Personal Finance should be required for every college student.

Hope this helps! Your daughter has taken the first step by addressing the issue.

Best Regards,
Curtis Arnold
CFCCT P.R. Director
http://www.cardratings.org

Sarah
Date: 1/24/2001 11:57 am CDT

Hi - I’m a regular lurker here, but just wanted to add my 2 cents to this conversation.
It’s a tough lesson learned, one but one learned well. My freshman year of college,(10 yrs ago) I was granted 2 credit cards, each with a $500 limit. Not much at all, but to an 18 year old who had never had a credit card, I was pretty darn excited. When I got them, my mentality was, “they’re only for emergencies”, and for the first 6 mos to a year, I was very good about using them sparingly, and then paying them off in full when I got the bill. However, over time, my definition of “emergency” got looser, and I was soon putting groceries, pizza, and evenings out on the cards. I couldn’t pay them off, and before too long, I was $1500 in debt. Again, not very much at all, especially considering the 2 kids on the 60 minutes special who were $14,000 in debt and killed themselves. But, it’s all relative. I paid my tuition myself, paid rent, food, utilities, etc. I had no parental financial help. I thought $1500 to credit cards was exhorbitant. I couldn’t pay the bills, and creditors were calling day and night.
I was finally able to pay it off, but it’s a lesson I learned well: Never again did I or have I allowed myself to carry a balance on my cards. I”m probably a credit card company’s worst nightmare today: in 5 years, I’ve paid every single credit card bill in full every month.
I realize the fault is no one’s but my own, but with all this talk about “how to educate kids about credit”, I’ve been thinking if there’s anything Mom or anyone could have told me that would have made a difference. And the turth is, I don’t think so. It was a lesson that I had to learn myself.
Yes, I think it’s unfair that these credit card companies prey on college kids, and the colleges make money off it. I’m perhaps lucky, because I wasn’t taken in by the free t-shirts, ball caps, etc, that they offer to college kids. But so many kids are. I wonder if there could be any kind of federal regulation limiting the amount of credit limit, or just any credit, available to someone under the age of 20 or 22, without verifiable income or a parental signature.

Linda in VA
Date: 1/24/2001 12:24 am CDT

Hi Sarah,

When the discussion about parent-funded debit cards came up, I thought, “that is a good way to teach kids about spending and credit cards.” Just a thought, but a parent could fund one of those cards with say, $500 (or whatever) and have a controlled learning situation. charge over the limit fees, late charges, even interest, etc. It would let the teenagers get the real feel of being in debt. But. like you, I’m not sure anything would work.

I really doubt that they will pass any regulation, if the kids are old enough to sign it. Parents, however, could certainly put the screws to the colleges and universities with a big, loud-mouthed campaign.

Really, things haven’t change much since I was in college in the 1960’s. Only then, they actually could send the card, unsolicited. And, there were no computers in use to track everyone’s every move. In all honesty, if I recall, I moved out of NY state and left some bills behind. They never even came looking for me. That’s not possible today.

Linda

Board Monitor- NK
Date: 1/24/2001 4:53 pm CDT

I totally agree with you Linda re the controlled learning situation. I think we as parents should do more in the way of educating our kids on credit.

I always kept one credit card account just for my kids to use. I had a credit limit of $500 on it and they were authorized users. They were totally responsible for paying the bill in full each and every month. One holiday season, they really went overboard at the mall. It was just plastic, not money… till the bill came.

I’m happy to say that the small but painful lesson when they were in their early teens really paid off. One is a sophomore in college with his own credit cards and he pays them in full each month. The other is still in high school and still utilizing the authorized user card successfully with the same terms.

In general, credit card companies market college students in order to establish long term relationships with them, not to get them in trouble right off the bat. Written off accounts cost money and are undesirable.

Kat
creditexpert.tripod.com/home.htm

Sarah
Date: 1/24/2001 5:31 pm CDT

Yes, those Visa buxx cards, or the other ones where the parents control how much money is spent by putting the money up front are a good idea, and I do agree that parents should educate (or attempt to educate) their kids about all areas finance and budgeting, not just credit cards. - Starting with having kids establish their first budget (however simple) when they first start receiving an allowance.
But a truth is that there are lots of kids (such as myself) who completely finance their own educations, without any help from Mom and Dad. My mom wouldn’t have been able to afford to put money on pre-paid card. (No debt on her part, but just standard self-employed, recently-divorced, single-parent types of financial difficulties). So therefore, I’ve been financially on my own since I was 18. For my Mom to co-sign a credit card, or even to make me an authorized user on one of hers, would be setting herself up to make up for my mistakes, something she should not be expected to do for an of-age child.
For someone paying tuition, living paycheck-to-paycheck, the lure of a credit card can be irresistible. I knew enough about budgeting and finance from my Mom to know that I can’t be signing up for each and every card I see, but there are kids who don’t have that kind of self-control. I realize that a federal regulation or state law or some such is too much to ask for, but education alone can’t hack it. There needs to be some sort of additional barrier in place. Even if no banks were allowed on campus, it’s still super-easy for a college kid to be exposed to credit offers. Go into a college bookstore and open a brand-new spiral notebook - the first page is an ad for a credit card. The clerk puts it in a shopping bag that is filled with more credit card ads. And with the prevalence of the internet nowadays, who needs the ads? You can apply for student cards right from the comfort of your dorm room, and they’ll mail you the t-shirt!

Ira Stoller
Date: 1/24/2001 11:14 pm CDT

I don’t know if this would work or enough credit card companies could be convinced to do it, but it seems to me that they could be very helpful if they made some changes in the way their monthly statements are presented. For instance, let them add an analysis section which would show you how long it would take to pay off your outstanding balance if you only made the minimum payment each month, how much you would pay in finance charges over that period of time, and what percentage of your payment went for “debt management” (interest or finance charges). The latter is a great eyeopener.

For instance, if you’re paying 15% interest, what is the TOTAL amount of finance charges you would pay if you paid only minimum each month. Remember, the interest is compounded. Thus if you keep a $1,000.00 balance for a year, you’d pay $150.00 the first month, $172.50 the second month, $281.25 the third month, etc. This would show the kids how much they are LOSING & WASTING. Will everyone read it? Doubtful, but I feel that enough will heed the call.

Eugene
Date: 1/25/2001 0:57 am CDT

For instance, let them add an analysis section which would show you how long it would take to pay off your outstanding balance if you only made the minimum payment each month, how much you would pay in finance charges over that period of time, and what percentage of your payment went for “debt management” (interest or finance charges). The latter is a great eyeopener.

It is. And credit card companies know that. They just don’t want you to know that. See where I am getting?

Eugene.

Ira Stoller
Date: 1/25/2001 7:51 am CDT

Sure. You’re refering to my favorite three word expression:

IT’S A BUSINESS!

What you’re saying is that the CC companies are in it to make money.

Board Monitor - CA
Date: 1/26/2001 12:08 am CDT

Sarah,

Thanks so much for sharing your thoughts/experiences!

Best Regards,
Curtis Arnold
CFCCT P.R. Director
http://www.cardratings.org