Fewer credit card users will be flaunting their school pride each time they pull out their wallets. Particularly popular with the alumni of the University of Michigan, the University of Southern California, the University of Texas and Penn State, college affinity credit cards are being issued less frequently nowadays than in the past. The Federal Reserve recently released the results of a survey which revealed a 17% drop in the number of credit cards issued over the past year that are affiliated with colleges or alumni associations. The data also revealed there was a 4% decline in the number of marketing agreements between universities and credit card companies last year versus 2009.
The decline in the issuance of credit cards on campus can be directly attributedto the CARD Act that specifically restricts the marketing of credit cards to undergrads. Passed in 2009, this law prohibits students under the age of 21 from procuring a credit card unless they get a cosigner or can provide proof of their ability to make payments.
The marketing deals brokered between colleges and card issuers provide revenue for alumni associations. Controversially, the more debt that cardholders carry, the larger the payoff is for the colleges. While the deals are undoubtedly financially favorable for the alumni associations, they “are not necessarily a good deal for a student without a job and without income,” according to Ruth Susswein of Consumer Action.
Federal Reserve data indicates that the Cornell Alumni Federation banked $904,575 as a result of its marketing arrangement last year. According to Richard Banks, Cornell’s associate vice president for alumni affairs and development administration, this money was then channeled into a scholarship fund, alumni functions like reunions, as well as for an alumni grant program to promote innovation.
He also stated that Cornell had eliminated all credit card marketing kiosks at sporting events such as lacrosse, hockey, football and basketball games well in advance of the 2009 CARD Act becoming law. “We were probably ahead of the curve,” Banks said.
Cornell’s previous marketing agreement with Chase provided company employees with free tickets to games in order to staff the kiosks while also giving them permission to dole out free stuff like T-shirts to entice new customers.