The first hit is always free – any dealer knows that.
Banks are invading college campuses by partnering with the college or university to make student IDs, and while they are there, they offer prepaid cards to students. Unable to offer free gifts like Frisbees, water bottles, stuffed animals and all those other cutesy handouts they used to entice students with, they are finding other avenues to get their brands on campus, and it seems to be working.
The Credit CARD Act put in place measures to prevent college students without an income from getting credit cards, prohibiting marketing strategies such as direct-mail campaigns and gift giveaways on campus. While research is showing that the CARD Act isn`t really working anyway, with plenty of students reporting that they still receive credit card offers, and still are able to qualify for card even with no income, banks are wasting no time finding other ways to get their logos on campuses across the country.
Already in Trouble
For a little background on the financial pickle that many college students are in, or which they will soon find themselves in, consider this: The Federal Reserve Bank of New York (FRBNY) said this week that Americans are paying down all of their debt except for student loans.
In their Household Debt and Credit report, the FRBNY says that consumer debt fell 0.9 percent in the first quarter of 2012, next to the last quarter of 2011, bringing it down to $11.44 trillion. However, student loan debt took a hike of 3.4 percent during that same time period, now sitting at $904 billion. In the average American household, student debt is the second-largest debt carried, after the mortgage.
Donghoon Lee, senior economist at the New York Fed, released a statement saying, “student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances. It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”
Could it be that students who found themselves in credit card debt after signing up for a credit card on campus found that they had to defer paying their loans in order to make credit card payments, leaving those student loans to balloon almost to the bursting point?
Reeling Them In
So what`s the problem with banks offering credit cards to students and trying to get their names out there for brand recognition? That`s what America is all about, right? Capitalism is the name of the game. However, the Credit CARD act specifically tried to prohibit banks from having so much of a presence on college campuses. Tempting students who may not have an income, and certainly don`t have adult judgment, isn`t good business.
The U.S. Public Interest Research Group, (U.S. PIRG) recently released their Education Fund report, surveying campus cards at the 50 biggest public universities in the country. They say that student choice is often limited when it comes to cards, and that college mascots and bank logos are often questionably intermingled. Their report offers the following facts about banks and colleges:
- There are almost 900 card partnerships between banks and the colleges surveyed.
- 32 of the 50 schools had debit or prepaid contracts with a bank or financial firm
- Huntington Bank has a contract with Ohio State University that will pay $25 million to the school during the next 15 years.
Anyone who has a college student in need of a little financial education, or who is a student in need of education, should check out the Credit-Land.com Student Credit Card Education Initiative, founded by Editor-in-chief Michael Germanovsky. It aims to educate students about responsible credit card use.