The Checkout

Too Young to Handle Credit?

Nancy Trejos

Congress should consider legislation that would regulate credit card issuers' marketing tactics on college campuses, Rep. Carolyn B. Maloney (D-NY), chairman of the Financial Institutions and Consumer Credit Subcommittee, said during a meeting she convened on the topic Thursday.

"Students want and often need credit, but may not realize all the consequences of applying for or getting a credit card," she said.

A number of witnesses, including a college student and a representative from New York State Attorney General Andrew Cuomo's office, testified for and against legislation to control how credit card issuers market to college students.

Benjamin Lawsky, deputy counselor and special assistant to Cuomo, said the attorney general is aggressively investigating whether credit card marketers have offered payments to colleges in exchange for exclusive access to students and personal information, such as their e-mail addresses and phone numbers.

"There are highly lucrative, somewhat secret, exclusive marketing agreements at the schools with the credit card companies," he said.

U.S. Public Interest Research Group, a consumer advocacy organization, earlier this year released a survey of 1,500 students at 40 colleges in 14 states in which nearly two in three students reported that they had at least one credit card. Fifty-five percent of cardholding students said they used their card for day-to-day expenses while nearly one-quarter said they pay their tuition with it. On average, those freshmen whose parents were not helping them with their bills had a balance of $1,301. Seniors had more than twice that, $2,623.

Nellie Mae, a student loan company, gathered similar data when it did a study of undergraduate credit card use in 2004. Seventy-six percent of undergraduates began that school year with credit cards, and the average balance was $2,169, lower than it had been in 2001. New numbers are expected later this spring.

Kenneth J. Clayton, senior vice president of the American Bankers Association, disputed that students handle credit cards poorly.

"Students handle credit as well as, and in some cases better than, the general adult population," he testified. "Banks have a vested interest in ensuring that the student's experience is a positive one, as the bank wants to build a productive, lifelong customer relationship that benefits both parties."

Maloney has introduced the Credit Cardholders' Bill of Rights, which would crack down on a number of deceptive credit card practices.

By Nancy Trejos |  June 27, 2008; 12:16 PM ET Nancy Trejos
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I don't think it is productive for college students to be shielded from aggressive marketing tactics while in school. When they leave school they will be met with those same tactics in the "real world". It would be better to educate them on what to look for (fine print, etc.) and how to live within their means. I didn't get my first credit card until I was 25 and it was because my mother drilled into my head that if you don't have money for it, you don't buy it. She also taught me how to look for the fine print on all types of advertisements and that who ever is selling you something will tell you all of the good things about the product, but not necessarily the bad.

Posted by: jax08 | July 3, 2008 12:37 PM

Her bill doesn't just protect students nor does it impose heavy restrictions on the bank. the bill only requires informing a customer before you change her rates and giving them time to decide whether they want to continue at the new rates or pay off everything they owe at his old rates. It also says credit card companies cannot retroactively impose the new rates on old debts.

Posted by: sh | July 11, 2008 2:24 PM

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