Students and Credit Cards

College campuses offer a lucrative venue for companies marketing credit cards. Walk on any campus and you will see representatives from various companies giving away shirts, mugs and applications for credit cards. Students are an easy sell. Most are experiencing the sense of being independent like never before in their lives. The idea of having credit cards in their name can seem like the ticket to financial freedom.
Banks have a tradition on many campuses. Bank of America and Michigan State University, for example, have a multi million dollar contract that gives the bank access to the names of students currently enrolled. The university gets a kick back for students who open credit cards with the company. Some relationships between banks and academic institutions even give bigger incentives for those student credit cards that regularly maintain balances. These mutually beneficial relationships put students in the middle at a time when many of them are not yet able to budget or fully appreciate the long term effects of debt. Recently, student organizations have been speaking out against the aggressive marketing practices that could harm students in the long run. Even the politicians in Congress have been examining the contracts between academic institutions and banks, as hearings were held about the issue last summer.
Credit card companies claim they are acting in good faith and helping students learn to become responsible consumers. Student credit cards offer an opportunity for students to develop a relationship with a bank and build a foundation for their credit history. Many banks that offer student credit cards provide courses for those customers on how to responsibly use a credit card, the consequences of not paying an outstanding balance and financial planning. Additionally, they say the credit cards offered to students have lower limits and more restrictions than those marketed to graduates. Students on many campuses can sometimes even choose between having debit cards or credit cards. Academic institutions say that any contracts they have with banks are undergone lawfully, benefit student programs and are in the best interest of students. In spite of those claims, there has been a movement to rein in the right to use student data when universities establish new bank relationships.
The current tough financial times are hitting students too. Some may open credit cards to help with expenses. It appears that banks and universities will continue to have marketing contracts and relationships, albeit at less aggressive levels than in the past. Hopefully students are learning valuable lessons from the credit crises and will approach credit card solicitations with a discerning eye.