Credit card companies should not be on campus marketing to college students. Such companies hook students with demographic-appropriate offers, and pressurise them into making rash decisions.
Some states already have rules preventing credit card companies marketing on campus. Examples of such states are California, Texas, Oklahoma and New York (college). However, most of the U.S. doesn’t have such restrictions.
A TrueCredit.com study reveals that one in four college students leaves with over $5,000 in debt. The same study also shows that one in ten students leaves with over $10,000 of debt (college).
When a new graduate is leaving college, obtaining their first proper job and trying to live independently, credit card debt can only be an extra worry.
Unfortunately, credit card companies are desperate to sign up college students. There are several reasons for this. One is that they think that there is a strong likelihood that the student’s parents will pay their credit card bill if it gets out of control. Secondly, students tend to be young and therefore have many years of credit life remaining; this means that the company can potentially receive a large number of interest payment.
Credit card companies are so keen on selling their products to students, they will often approve an application, even if the student doesn’t meet the lending criteria. For example, a student could obtain a credit card without a job, an income or any credit history. Credit card companies are wise to the lifestyle of students and they use this in their marketing strategies.
Company representatives can often be seen on campus giving away free gifts, for example tee-shirts, sandwiches etc. As students tend to be short on money, free gifts appeal to them. Moreover, in order to obtain these freebies, they are asked to fill in a credit application form. Filling in a form sounds harmless enough. However, when the credit card arrives with the prospect of seemingly free money, it can be hard for a student to resist using it.
When a student is ready to take on a credit card, he should spend time researching the available credit cards and finding the one most compatible with his situation (teen). He needs to investigate credit unions and bank cards, traditional and secured, and explore each card’s interest rates and annual fees. Furthermore, the student should research the various companies’ practices and reputation. He may also want to ask friends and family for advice. Once all this has been done thoroughly then he should apply for his chosen credit card.
When credit card companies target students on campus, they are often pressuring the students into making a spur of the moment decision and commitment, without any research whatsoever. Is a student has limited knowledge about credit cards, and what can go wrong as a result of having one, they may sign up as a result of the free gift being offered, or because his friends are signing up.
Once a student has a credit card in his name, he is at risk of financial difficulty. Although this is not always the case – some students are knowledgeable about credit cards and are disciplined about using them – many students can and do get into severe debt after obtaining a card. There are temptations spend money everywhere, and often a student will want to spend more money than he realistically has available.
Some students may obtain a card with the objective of only using it for emergencies. However, the temptations of the heavily marketed country that we live in can make it easy for this discipline to slip. Alternatively a student may use a credit card to live during term time, intending to pay the balance off over the summer. Unfortunately, though, the balance can quickly add up to an amount too substantial to be paid off over one summer.
As soon as a college student has a credit card balance that he can’t pay off in full, he can easily fall into a situation where he is only able to pay the minimum payments each month. When this happens the balance continues to increase, as do the interest payments.
Once in this state, the student has limited choices of how to resolve it. He could work extra hours in a paid job in an attempt to reduce the debt. However, this may have negative effects on his academic studies and lead to him getting bad grades or falling behind. Alternatively, the student may approach his parents for financial help. The danger here is that the student won’t have truly learned the lesson about the consequences of debt, and he may well fall into the trap again. Instead, he may choose to carry on paying the minimum payment each month until he graduates. This decision may work as a short term measure, but the student could end up leaving college with a substantial debt and a low credit score.
These companies are aware of what they are doing. They have researched their target and they will do anything they can to get people to sign up with them. The representatives are usually on a commission for each person they get to fill in and sign an application for a credit card, and therefore there is a direct incentive for them. The use of freebies such as clothing or food proves that the companies have researched the student demographic. Students are low on steady income and often have to live on a shoestring, meaning that, as a species, they are attracted by free items. The concept of a credit card can then be an extension of this freeness mentality; a credit card can feel very like being given ‘free money’ as the card holder can purchase whatever he likes without a single penny leaving his bank account.
Furthermore, many students are young and financially inexperienced. They also take the lead from each other. If one student signs up for a credit card it is likely that his friends will follow. This is another reason for the companies deciding to market on campus; if they can attract one student to their stall, a whole group of students tend to arrive soon after.
Nevertheless, the credit card companies that target college students on campus are targeting, and encouraging a quick decision from, individuals who don’t have sufficient knowledge about the impact a credit card could have on their lives. Students can be easily tempted by credit or a free tee-shirt, but could end up in a downward spiral of debt.
Therefore, credit card companies should not be allowed to market their products in this way.
“College Credit”. About Credit. 1 March. 2011. http://credit.about.com/od/buildingcredit/a/collegecredit.htm
“Teen Credit Cards”. Financial Plan. 1 March. 2011. http://financialplan.about.com/od/studentsandmoney/a/TeenCreditCards.htm