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College Students and Credit Cards

In the present post-credit crisis world, where small businesses and other reputable firms are still finding it difficult to secure loans and credit, credit companies are still inundating college campuses with marketing material, practically begging students to apply for a credit card. In the past, free T-shirts, food, or other items were offered simply for a student’s signature on an application.

The reason for this seeming contradiction is that college students remain a highly lucrative and profitable segment for the credit card companies. Companies are not only trying to build consumer loyalty by getting to their customers early, but college students in particular are often more likely to charge their cards and incur the associated interest charges and fee. Students who have had little practical real-world financial experience and who may have never been educated on basic financial topics often do not understand the implications of debt and of credit cards. And even if a student defaults on a card, a parent will often step in to pay off the debt in order to protect the child’s credit rating.

Skyrocketing consumer debt levels in college students have caused some colleges and legislators to take steps to curtail companies from throwing credit at potentially vulnerable students. A growing number of colleges have taken steps to restrict how and where credit companies are allowed to market to students.

In February 2010, the U.S. federal government passed legislation to further set up guidelines to protect students. Credit companies are forbidden from issuing credit to anyone under the age of 18. Those under the age of 21 must have an adult cosigner on the application, unless it can be documented that the individual has the financial resources to pay off the debt. The regulations also curb fees that a lender may charge.

Despite these restrictions, credit companies continue to aggressively market to college students. It is ultimately up to the parents to discuss credit with their children and for the student to understand the implications of debt and use credit responsibly. Students who are currently in credit card debt may find it beneficial to seek credit card debt assistance from a qualified professional in order to limit the financial fallout from having incurred substantial debt.

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