Credit Card Companies Still Target Students
College students remain a prime target for credit card issuers…
Even in the midst of a slowing economy and economic downturn, college students remain a prime target for credit card issuers. Campuses continue to be flooded with flyers and brochures attempting to lure first time cardholders into applying for a new credit card. “Undergraduate students and credit cards remain a dangerous combination,” said Marie O’Malley, vice president of marketing for Nellie Mae, one of the nation’s largest student loan providers.
“Research has documented that students are targeted and bombarded by credit card company solicitations, in the mail, on the phone and while they are walking across campus,” said Chrisine Lindstrom, Student Debt Program Director of the U.S. Public Interest Research Group, in testimony before a legislative panel led by Rev. Carolyn Maloney (D-NY) addressing credit card practices affecting college students. Lindstrom cited a 2008 survey which found that 80% of students said they received direct mail from credit card companies, with 22% receiving, on average, four phone calls each month. Free gifts that often come with strings attached lead many college students, who lack financial experience and knowledge, to apply.
According to student loan provider Nellie Mae, 56% of undergraduates get their first credit card at the age of 18 and by their final year of college, 91% of undergraduates have at least one credit card. Nellie Mae also reported that the average outstanding balance was $2,169.
Although college students are perceived as high-risk, they are a very profitable demographic for credit card issuers to pursue. Students are a prime target since they tend to hold onto their initial credit card long into adulthood, which is especially attractive because loyalty means higher profits in the long run. In addition, the cost per acquisition is low; sometimes all it takes is a free t-shirt or a sandwich to get college students to sign on.
Kenneth Clayton, of the American Bankers Association Card Policy Council, testified before the panel that despite conventional wisdom, the vast majority of students manage their credit obligations well. With regard to legislative proposals that would limit or prevent certain students from obtaining credit cards, Clayton urged the committee to exercise caution. “Students handle credit as well as, and in some cases better than, the general adult population,” he said.
While there are a few bills being floated by members of the House and Senate, including Rep. Maloney, to address concerns about credit cards on college campuses, as of yet, none have been voted on. Regardless of the lack of legislative action, a small but increasing number of campuses, like the University of Maryland, College Park and the Rochester Institute of Technology have voted to restrict credit-card marketing to students. However, most experts agree that regardless of restrictions, the key to tackling the student debt problem is education - all students need more instruction on the benefits and dangers of credit.
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