Credit cards go after college students
— -- Banks are getting more aggressive — and creative — in their efforts to pitch credit cards to college students by hawking cards near college campuses and striking exclusive partnerships with college alumni associations, according to a growing body of research.
The latest sign: A study released by the U.S. Public Interest Research Group shows that 76% of students say credit cards have been marketed to them through tables set up on or near college campuses, and nearly a third of these students have been offered a free gift to sign up. T-shirts were the most common gift given, but students also received Frisbees, candy, pizza — even iPods — to fill out a credit card application, according to the group's research.
No comparable data exist for previous years. Still, the group's research provides anecdotal evidence that "credit card companies are increasing their efforts to target college students," partly with "free gifts that appear to be getting more substantial" in value, says Ed Mierzwinski, consumer program director at US PIRG.
College students have long been an attractive demographic to banks because they have few financial ties. Banks compete to provide students with credit cards and bank accounts in hopes that students will come back to the banks when they need mortgages and car loans.
But as students' debt loads have soared — along with the cost of college — regulators have become increasingly concerned about the marketing of credit cards to students. More than half of students are now charging books to credit cards, while nearly a quarter are using them to pay tuition, US PIRG says.
In 2004, the average undergraduate owed $2,169 on credit cards, while the average graduate student owed $8,612 in 2006, Nellie Mae data show.
Research conducted by USA TODAY two years ago shows that despite nearly a dozen states' restrictions on credit card marketing on college campuses, banks have become more aggressive about reaching students through phone calls, e-mail and off-campus locations.
Banks have also increasingly forged credit card partnerships with colleges. No national numbers are available on these deals. But by 2006, each of the largest 10 colleges and universities — through their alumni or athletic associations — had partnered with a bank to issue co-branded credit cards to alumni and students, earning the colleges up to millions in annual fees, the paper found. Banks often receive student information and exclusive marketing access at campus events.
A growing number of colleges are also striking similar partnerships with banks to issue ID cards that double as debit cards. In a separate survey earlier this year, USA TODAY found that two-thirds of the nation's largest 15 universities either partner with banks to promote debit cards or are looking to do so.
Colleges defend these partnerships as a way to offset severe cuts in state funding. But consumer groups worry that these alliances are encouraging students to sign up for products with high interest rates or fees, making it easier to get mired in debt.
Most students who responded to US PIRG's latest survey — 1,584 students from 40 schools were randomly surveyed on campus from October through February — favored some form of card reform on campuses. Specifically, 38% of students supported a ban on schools or student groups receiving money from banks in exchange for the right to market credit cards on campus, while 67% opposed schools selling or sharing student information with credit card companies.
Regulators are paying close attention. In New York, Attorney General Andrew Cuomo has expanded an investigation of the student loan industry to colleges' partnerships with financial providers on credit and debit cards. Ohio Attorney General Marc Dann has also begun examining credit card marketing on college campuses.
John Hall, a spokesman for the American Bankers Association, a trade group, says most college students use their credit cards responsibly. Banks' partnerships with colleges, he adds, can be positive for students, because it gives them the "opportunity to get a card that the university has been able to vet and approve."