Credit card companies target college students despite federal law
In 2009, the federal government passed the Credit Card Accountability, Responsibility and Disclosure Act, called the Credit CARD Act for short. The goal of the legislation was to decrease the number of college-age adults who signed up for cards and incurred unmanageable credit card debt without realizing the impact of their actions on their family and their future. Now, adults under the age of 21 are only allowed to sign up for a credit card if they have a co-signer or if they can prove that they have income.
While the CARD Act forbids credit card companies to offer freebies to students for signing up for cards, it does not keep issuers from marketing on college campuses. One product that is commonly marketed at colleges is the affinity card, a credit card affiliated with the school that makes money for both the credit card company and the college itself.
In 2010, the University of Georgia received $1.3 million in marketing dollars from FIA Card Services, a subsidiary of Bank of America. In exchange, the college allowed the company to market the credit card to students and alumni at sporting events and provided contact information for students and alumni so the company could market directly to them.
While the practice of selling student addresses and telephone numbers seems shady at best, many financial experts believe that the CARD Act has made significant progress. After the law went into effect, the number of credit card accounts among college students fell by 17 percent, according to CPA and financial literacy professional Sharon Lechter.
Despite that marked progress, Lechter believes that there is still a long way to go to save the next generation from a dismal financial future. “We need to educate young people about how to manage money but also how to make money,” she said. “That’s the only way we’re going to save this generation.”
Source: Fox Business, “The Big Business of Credit Cards on Campus,” Geoff Williams, Nov. 28, 2011