College Students and Credit Card Troubles - Are College Students Ready to Handle the Responsibilites of Managing Credit?

College Students and Credit Card Troubles - Are College Students Ready to Handle the Responsibilites of Managing Credit?

Although credit card companies see college students as a golden market of loyal future customers, they are not ready to handle the responsibilities of managing credit. Credit card companies should not be on campus marketing to students. Many college students are being ambushed with credit card offers the moment they step on campus. When these young students obtain a credit card many times they end up in financial distress. There have been growing concerns lately about college students and credit card troubles. It seems college students are accumulating more debt than ever before. Society must take a deeper look at what is going on and how to fix it.

The first question that needs to be addressed is why credit card companies are marketing to college students. Students have limited to no income and no credit history. The rest of the population is required to show proof of income and credit history to obtain a credit card yet students need nothing aside from being 18 or over. According to an article in the Journal of the Academy of Business and Economics (2010), credit card issuers are eager to supply college students with a credit card because they anticipate them coming back for future services. These services include auto loans, personal loans, savings accounts, and mortgages. Credit card companies know that each year they can obtain a fresh batch of customers as they begin college. The credit card industry views college students as possible loyal lifetime customers and uses gifts to persuade students to fill out an application.

Aside from banks aggressively marketing on campus to students, college students actually find credit cards appealing. Many students rely on credit to cover expenses throughout the school year. Books, food, gas, and other necessities can be very expensive. Since many students have limited cash flow they find the buying power behind credit cards very appealing.

How is it that college students are getting into so much debt with credit cards? One of the biggest reasons is that they are having cards marketed to them on campus without any education on credit. Temptation also gets the best of many young people and they end up over spending. Consumer Finance: College Students and Credit Cards stated that because the students lack education in debt management and finance they run into trouble (GAO, 2010). Many students who have a credit card are full time students who have no regular income therefore have no way to pay the balance when the bill comes due. When students are given credit without proper education on the terms and conditions, they end up with a big surprise when the bill comes. One study showed that students who sought credit cards from on campus sources had higher credit debt ratios than those who received their cards from other sources (Norvitis& Szablicki, and Wilson 2003). Some universities are worried because as a result of mismanaging credit students have had to take lighter course loads so that they could work to pay off their debt.

Since all of the recent concerns regarding college students and credit card debt there have been changes brought about. The Washington Post published an article on a law that was passed in 2009 which bans issuers from providing credit cards to people under 21 unless another adult co-signs or the student can show an independent source of income (Ylan Q. Mui 2010). The law also put a stop to issuers offering freebies or prizes in exchange for applying for a card. Schools are also taking action by banning credit card companies from setting up tables on campus. Many states are now passing individual laws regarding credit card marketing on college campuses. A study by Warwick and Mansfield (2000) found that the majority of students did not even know the interest rate they were paying on their card. Many schools are now offering more classes on finance to educate students about credit and managing debt. To help solve the debt Issues College students are having parents need to become more involved in their children’s financial habits. If parents teach their children to spend wisely and educate them on credit cards and debt before sending them off to college some problems can be avoided. If students know their parents are monitoring their credit card usage they will most likely spend less.

There has been and continues to be so much controversy surrounding credit card marketing on college campuses. It is important to keep in mind that students are on campus to get an education not rack up credit card debt. Even though there are many students who use credit cards responsibly and pay off the balance in full each month there are many more who run into serious debt trouble. With all of the problems college students have paying off their credit card bills we must wonder why do credit card companies still view them as a golden market? One would think that if the students are racking up debts they cannot afford to pay then credit card companies would look for a more reliable population to market to.

References
Credit Card Use Among Students at An Urban University With A Large Commuter Population. (2010). Journal of the Academy of Business & Economics, 10(4), 15-24.

Consumer Finance: College Students and Credit Cards. (201). GAO Reports, 1(773). Mui, Y. Q. (, August 2010). Credit Reforms Reach Campuses. The Washington Post, p. .