Credit Cards Consumer Debt Is a Major

Credit Cards

Consumer debt is a major problem In America, with credit card debt being the most prevalent type of consumer dent. A great deal of credit card debt is acquired while consumers are in college. This debt often follows them for many years after college is over and accounts for a great deal of the lifelong consumer debt. For this reason the marketing of credit cards to students has been a hotly debated issue. The research indicates that the marketing of credit cards to college students is indeed detrimental to their future financial stability and as such laws have been developed in the attempt to change the practice of marketing credit cards to students on college campuses.

Marketing credit cards to college students has been an issue on college campuses for many years. Pirog & Roberts (2007) reports that nearly 93% of all college students are in possession of at least one credit card. In addition 33% of these individuals received credit cards while still in High school and nearly 58% received them had more than four cars. The authors further report that "Substantial evidence suggests that consumers who regularly use credit cards spend more than those who use other payment mechanisms. College students in particular appear to be vulnerable, often using credit cards to live beyond their means, pay the minimum required payment, and incur exorbitant interest balances. Recently, the average credit card debt among students was estimated at nearly $3,000, 23% of college students carry balances of $3,000 to $7,000, and 10% have credit card debt exceeding $7,000 (Pirog & Roberts (2007)."

Although credit card companies are fully aware of the amount of credit card debt that college students are in, they continue to market their products on college campuses. In addition these companies are aware that many students also have substantial student loan debt and credit card debt increases the likelihood that they may default on credit card payments or on their student laws. In both instances these defaults can result in poor credit scores for many years which will inhibit the ability of these individuals to get mortgages and car payments.

Credit card companies market to college students because they are likely to have higher lifetime earnings than people who are not college educated; as such the credit card companies desire to retain these customers as early as possible. This means marketing credit cards to students. For some observers this practice seems unethical. The unethical nature of this practice lies in the fact that the credit card companies often issue cards to students who have no job or are only employed part time. These students, not fully understanding interest rates and the problems associated with accumulating a great deal of debt, make purchases and begin to accumulate a great deal of debt in a short period of time. These credit card debts then take years for the student to repay. According to Nelson et al. (2008)

"credit card debt is an important, yet understudied, aspect of financial well-being among college students, particularly given the widespread debt among LJ.S. undergraduate and graduate students. 'A recent report from the LJ.S. General Accounting Office concluded that credit card issuers have identified college students as "a profitable market over the long-term," and that "many issuers adjusted their underwriting standards for students, enabling college students with little or no employment income to obtain credit cards."* Although there is a great concern on the part of university officials that students lack the financial savvy to effectively manage credit and debt, there are still a large number of U.S. postsecondary institutions that do not restrict or manage credit card issuers' access to students or prohibit aggressive marketing techniques on campus (Nelson et al. 2008)."

Marketing to college students is also viewed as unethical because the credit card companies are fully aware of the dangers of debt and the type of stress that such debt can create. However, companies have been allowed to market to young people on college campuses for many years because these companies sponsor various aspects of collegiate life. That is colleges and universities receive money from credit card companies which allows the college to offer certain services and/or programs to students. One of the most controversial aspect of the relationship between universities and colleges is the affinity-card contracts. These contracts "encourage colleges and universities to sell students' contact information to credit-card companies. These often confidential contracts bond hundreds of schools across the country with credit-card companies eager to sign up undergraduates. In some cases the school's financial reward increases handsomely when students frequently swipe their cards (Silver-Greenberg, 2009)." This practice is pervasive on college campuses throughout the country. Many colleges are desperate for the financial rewards that come with selling contact information. In this respect colleges and universities seem to be stuck in the present and not concerned with providing the best foundation of the future of their students. These colleges and universities must understand that success in life I not only determined by the type of education they receive in the classroom but also financial choices these students make during their collegiate years.

The marketing of credit cards to students has become so problematic that in 2009 new credit card legislation included laws that prohibit full-time college students under 21 will only be allowed to receive a credit card with a limit that is no more than 20% of the students income. However, they can get a higher credit limit if they have a co-signer. The clause for a cosigner is designed to protect college students from spikes in interests rates because the co-signer will have the power to approve these increases.