The Era of Unfettered Marketing of Student Credit Cards May Be Coming to an End

03/28/09

When students begin their studies at a university, they are quickly greeted by give away and rewards if they apply for student credit cards. Companies pushing incentives to sign up for student credit cards have been allowed to station themselves in student unions and on outdoor quads for years. Students are an easy target. Many are on their own for the first time and long for the independence and freedom of adulthood. For some, student credit cards offer the promise of instant gratification and new spending power. Many state legislatures and college administrators, however, feel that credit card companies are taking advantage of students at a time when many are very naive about financial obligations and do not yet understand the long term consequences of debt. Rutgers University banned companies from marketing student credit cards on its campus several years ago. Some universities are considering less drastic measures to reign in behaviors that push student credit cards, as state lawmakers discuss ways to help them do that. California, Oklahoma, New York and Texas are among the states that have passed laws that rein in marketing and solicitations of student credit cards, and Illinois is currently debating similar restrictions. The New Jersey legislature recently began its efforts to dampen aggressive practices around student credit cards, as well. Lawmakers announced a bill that would make it mandatory for banks to offer financial seminars and programs before any student credit cards could be distributed to new applicants. Those financial courses would give new applicants background on what various rates and fees actually mean, what happens when balances are not paid, how debt is accrued and how debt and delinquencies affect credit history. The bill also limits sales gimmicks, so students are not wooed into applying for credit cards just to get the free pizza or shirt. New Jersey legislators, like those of the states that preceded them, are hoping to prevent bad credit habits in the students on their campuses. Credit cards can be a useful financial tool, if used appropriately, and legislators want to give students a chance to make sound decisions about those cards.

The state of the current economy has left many consumers reevaluating their spending habits and credit behaviors. The years of a booming real estate market and economy left some feeling they could spend freely without consequence. As a result, some are now reworking their budgets and striving to eliminate credit card debt. State lawmakers and college administrators who are trying to restrict marketing practices regarding student credit cards are hoping they can keep young people from establishing bad credit habits early on. By providing protection for vulnerable and financially green students on campuses, perhaps it will help build a foundation for responsible consumer spending.

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