Student credit cards on campus: Who’s the biggest player?

Besides, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 means that anyone under the age of 21 can’t get their hands on a credit card unless they either have a co-signer (you), or prove that they have income. And universities aren’t allowed to market on college campuses anymore. Right?

Well, not exactly. The Credit CARD Act doesn’t stop credit card companies from marketing on college campuses. What the issuers no longer can do is offer freebies to students. In the past, credit card companies would dangle a free T-shirt in front of a student just for signing up for a credit card, which, if you think about it, is not a great start on the road of fiscal responsibility.

A college-aged kid with very grown-up debt will be less common than it used to be, to be sure. However, according to a report from the Federal Reserve, issuers are still paying big bucks for the privilege of issuing affinity cards. While your under-21 can’t get a card today, the issuers still want them to be loyal to their school and their student credit cards once they can.

The biggest benefactor of the credit card industry in 2010, according to the Fed’s study? Penn State Alumni Association by a mile, receiving more than $4.2 million in marketing dollars from FIA Card Services, a subsidiary of Bank of America. The full top 10 list of colleges and the marketing dollars shakes out like this:

1. Penn State Alumni Association ($4.2 million from FIA)
2. Ex-Students Association of the University of Texas ($2.3 million from FIA)
3. Alumni Association of the University of Michigan and the Regents of the University of Michigan ($1.6 million from FIA)
4. University of Southern California ($1.5 million from FIA)
5. University of Tennessee ($1.4 million from Chase Bank)
6. Duke Alumni Association, Inc. ($1.375 million from Chase Bank)
7. California Alumni Association and the Regents of the University of California ($1.353 million from FIA)
8. Arizona State University Alumni Association ($1.349 million from FIA)
9. Arch Foundation for the University of Georgia, Inc. ($1.307 million from FIA)
10. General Alumni Association of the University of North Carolina at Chapel Hill ($1.25 million from FIA)

Many of the credit card companies sponsor football games, targeting both the alumni and the current crop of students, and the sponsorship is impossible to miss. For instance, Duke’s arrangement requires mentioning Chase at least twice at each football and basketball game. Chase, in their contract, also states that they can install 16 booths at every home game every season “within or on the grounds surrounding Neyland Stadium.” They have the right to install six booths at the home basketball games, and two at the home baseball games.

By far, it’s Bank of America’s subsidiary, FIA Card Services, that has the greatest number of agreements in place. As the Fed’s report points out, at the time of the survey, FIA had 848 credit card agreements, for which they paid colleges $55 million.

That’s 15 times as many agreements as the next runner-up: U.S. Bank National Association had 54 agreements in 2010, giving a comparatively paltry $1.8 million to colleges. Chase had 28 agreements, but spent far more on its marketing: $9.1 million.

So what are the colleges giving the credit card companies for the money? As you might expect, among other things, they’re shelling out phone numbers (often specifically requesting numbers that are not included on do-not-call lists), email addresses and snail-mail addresses of students and alumni, and, yes, as noted, the issuers are often allowed to come onto the campus to market student credit card offers.

As with anything, the answer probably depends on one’s point of view. Sharon Lechter, the co-author (with Robert Kiyosaki) of the modern-day personal finance classic “Rich Dad Poor Dad,” has earned the right to be cynical about colleges and credit cards, considering her son accrued $2,500 in debt during his freshman year in college.

But in spite of that, Lechter sounds pretty encouraged by what has transpired since the Credit CARD Act became law. “The number of credit card accounts among college students fell 17 percent after the CARD Act, and I feel pretty confident saying that was due to not being able to offer free pizza and T-shirts for a kid filling out an application,” says Lechter, who is also a CPA and founder of the Paradise Valley, Ariz.-based financial literacy company Pay Your Family First. But she adds, “The issue isn’t the credit card. The issue is the lack of (understanding) how to use it.”

Lechter says that if colleges are going to help credit card companies market to their students on campus, that may not be so bad, especially if the card has reasonable terms and a low interest rate. But schools need to do a better job of educating their students. “We need to educate young people about how to manage money but also how to make money, as in how to become entrepreneurs,” Lechter says. “That’s the only way we’re going to save this generation.”