With campus visits, brochures, sponsorships and a variety of other marketing strategies, credit card companies find any way to get their cards and their billing statements into the hands of college students.
A rite of passage into college life not only requires purchasing a college sweat shirt, but also pocketing at least one credit card and the accompanying T-shirts and coffee mugs emblazoned with Visa, Master Card, Discover or American Express emblems.
Still, it’s questionable whether students are a good investment for credit card companies, especially since they have paltry incomes and it is expensive to bail out students buried in debt.
A study conducted by the United States Public Interest Research Group reported that 61 percent of college students who are responsible for their own bills obtained cards at campus tables, and that 79 percent have at least one card.
Despite the prevalence of credit card representatives on University grounds, the idea of a credit card in every backpack isn’t all that palatable to administrators. According to University rules, credit card companies are not allowed to rent table space in University buildings such as Coffman Union. A union spokeswoman said credit card companies don’t ask permission to come to campus; they just set up tables outside.
The University recently sent out notices to parents warning of credit card dangers, including case studies of students who dropped out of school because of their credit debt.
With the average student carrying $986 in credit debt, parents might have cause to worry — or maybe not.
Ray Sirmons, a student services representative for American Express, said that just as many adults fail to pay their credit debts as students.
“It’s worthwhile to market to college students because they eventually graduate and continue to be good customers,” Sirmons said.
Students, however, don’t just make “good” customers, they make excellent customers, even when they can’t spend as much as their income-enabled parents. Given students’ relative poverty, they often make only minimum payments on their bills. As most people know from experience, this puts more money in creditors’ pockets in the form of drawn-out interest payments.
Credit card companies run into problems when students start turning manageable debt into unmanageable debt — when the minimum balance alone is more than their next two or three paychecks.
When this happens, students’ credit ratings take a beating. To make sure companies get what is owed to them, they often reduce interest rates and help students work out a realistic payment plan.
To prevent college students from going into debt, major credit card companies offer credit education services to students via the Internet. In all, the companies warn that credit abuse can damage a person’s credit history, which employers and even colleges review.
Nationwide, 4 percent of all credit card customers are working with collection agencies to pay off their debt. The same portion of student credit card users work with collection agencies.
“College students don’t really have a lot more problems than the regular person,” said Ken Scott, a representative from the National Foundation for Consumer Credit. “Since their maximum credit lines are kept low and there is consumer education out there, debt pretty much evens out between all ages.”
Low balances, however, don’t do much good when students have more than one card.
The USPIRG’s study found that the average credit card holder has 2.6 credit cards. When credit cards arrive in the mail, some students see them as a ticket to a free shopping spree or endless nights at the bar.
Regardless of how shaky college students are when it comes to credit cards, the long-term gains make it profitable for the companies that issue them.