As a college student, I can't stand when credit card companies set up marketing tents and booths on college campuses to convince students to sign up for credit cards. Thanks to the Credit CARD Act of 2009 (legislation that took effect in February 2010 to create transparency and fairness in the credit card industry), credit card companies are prohibited from offering incentives (free lunches, t-shirts) to students who agree to sign up. The CARD Act also mandated that credit card issuers submit the following to the Federal Reserve, when it comes to college credit cards:
1. Exactly how much money credit card companies spent in fees to universities for the ability to set up on college campuses.
2. How many new accounts were opened as a result of this marketing
3. The number of existing college credit card accounts open at year's end
According to a new report released by the Fed, credit card issuers paid a whopping $83,462,712 to colleges, universities and institutions of higher education to promote student credit cards. As a result of this $83 million+ spent, credit card issuers gained an extra 53,164 college credit card accounts in 2009.
Let me get this straight: $83 million was spent to encourage college students to open up credit card accounts, which allow students to spend beyond their means and rack up huge amounts of credit card debt (the average per student is over $4,100, according to Sallie Mae). You may think that college students use credit cards for books and groceries. But when 50% of college students have 4 credit cards or more, according to Sallie Mae, it's hard to believe that only necessities are being charged on their credit cards! Irresponsible credit card use in college will not only ruin the credit score of students, but it will instill poor spending habits for years to come.
Among the high rollers in this student credit card marketing extravaganza, Chase Bank tops the list, spending over $13 million to entice new student customers.
Bottom line: stay away (far away) from any credit card marketing tent that you see on campus. Credit cards offered at these tents are usually littered with hidden fees and high interest rates. If you insist on having a credit card in college, think of it as a way to build strong credit history and not as a way to extend your spending abilities. Visit your school's credit union, which offers credit cards to students at low interest rates and without harsh fees - visit CreditCardConnection.org to search for the most reliable credit unions.
Check out my interview on ABC News for more information on college and credit: