Students consider everything an emergency. From buying textbooks to purchasing a last minute date outfit, they do their best to use up any money that they see available in their bank account. This can be a problem for young people that don’t know their limits. When college aged men and women start to run through their parents’ money, it’s a good idea to suggest student credit cards to cover their expenses and give these coeds a sense of financial responsibility.
Capital One, one of the largest banks in the U.S., is looking to break into the fast growing student credit card industry with their new Journey Student Rewards Credit Card. While there are currently many student credit cards on the market, Capital One is planning to use this card to pull itself out of a financial slump.
Like many banks in the Great Recession, Capital One’s profits are declining. Since 2008, profits have steadily dropped almost $50 billion, mostly due to the current failing real estate market and the fact that fewer new accounts are being created. Despite the alarming statistics mentioned here, Capital One remains optimistic. The company hopes that by securing their spot in the student credit card market, it can reinforce its dominance in the credit world.
Discover, Capital One’s main competitor, is making it hard for the company to run the show in a cutthroat market. Currently, Discover provides student credit cards to over 750 schools in the U.S. The new Journeys Student Rewards Credit Card offers slim competition to the already established Discover student rewards cards despite its attractive features. The card boasts 1% cash back on purchases, no annual fee, and a relatively low APR of 19.8%.
“Capital One’s new Journey card is a role model for student credit cards,” said Dr. Mary Ann Campbell, in a Capital One press release. “With its low initial limit, text and email payment reminders, and rewards for good credit behavior, it is like giving young adults a credit card with training wheels that will prevent them from falling into bad credit card habits.”
Capital One is also trying something unheard of in the credit industry, a 25% bonus for students paying bills on time each month. I applaud their efforts but wonder if it is enough to allow the company to make headway while Discover student cards offer 0% APR for the first six months and a 12.99% to 19.99% interest rate depending on previous credit history.
Similar to Capital One, Discover also offers unlimited 1% cash back bonuses. In addition to these tempting rewards, their student cards also offer a 5% cash back bonus plan that includes categories like travel, restaurants, and groceries. Even more cash back is offered for consumers who shop in Discover’s online mall. The cash back offers for these purchases range from 5% to 20%.
The Capital One Student Rewards Card doesn’t take pride in giving student consumers the most money back, but rather they applaud themselves for setting up the paradigm necessary to have high credit scores in the future.
“Excellent credit scores don’t happen overnight. It takes diligence – learning to spend wisely and paying bills on time over a period of years – so it makes sense to start early,” said Mike Wassmer, EVP, US Card at Capital One.
“Our goal with the Journey Card is to provide students with reasonable access to credit with appropriate guardrails in place. This card provides tools and transparency and it reinforces positive financial decisions so students can be confident about using credit and start out on the right path to a bright financial future.”