Credit Cards.

Colleges and universities are banning credit card marketing on their campuses, to assist students avoid burying themselves in debt. Marketers use a variety of different tactics, some aggressive in nature, to solicit young consumers into buying into credit. Other less visible, but equally as invasive, tactics include contracting student organizations to push word of mouth advertising.

Students are a low-risk target because many are still dependent on their parents – who are willing to bail their children out if they run into trouble paying off the credit card’s balance. This behavior has resulted in only approximately 40% of all full-time college students paying their credit card balances in full every month – with “10% of students carrying a balance of $8,000 or more.” This epidemic will force hundreds of thousands of students into personal bankruptcy before the age of 25, and will drastically affect their ability to secure future housing after college. As if the current sub-prime lending situation hasn’t made acquiring a loan difficult enough, a record of bankruptcy will surely cause finding a mortgage with an attractable rate to be nearly impossible.

Students’ reactions haven’t been accepting of the colleges’ initiatives; most students feel the universities are “playing parent” in their efforts to shelter them from the credit card marketers. And, banning credit card companies’ marketing strategies on campus doesn’t affect the direct mail, online, or other point of purchase efforts to solicit students to pay with plastic. Recently, Visa has been aggressively marketing the benefits of plastic through broadcast advertisements that depict cash as clunky and slows down the “purchasing process” to the point of causing disruption and mayhem. So, how are impressionable, young adults supposed to filter out the noise and make financially healthy decisions, when there is so much pressure to “Don’t leave home or the dormroom without it?”

Credit card solicitors are participating in market segmentation when selling the idea of credit cards to students. Understanding why they are focusing on them is the first step a student can take when being approached by a credit card solicitor. Rather than ban credit card companies from soliciting students on college campuses, perhaps education and enlightenment is the answer – not prohibition.

Banning the credit card solicitors from a campus doesn’t eliminate the problem of students incurring more debt than they can pay off. The companies will continue to target students through other promotion strategies like broadcast, online, and POP displays, similar to how Scion differentiates its promotion efforts. However, if students are educated and required to take a credit management class during their initial freshman semester – similar to college orientation, they will be better armed to make informed, adult decisions. As the text alluded to, it’s amazing consumers will spend weeks researching a $500 iPhone but select a $30,000 per year university based on whether or not a friend is attending that school, or apply for a credit card at a store’s checkout without paying attention to the interest rate or annual fees charged by the card. Most of the time the card’s annual percentage rate is more than twice as much as the percentage discount off the initial purchase with the card.

There is an adage that the best offense is a good defense. Banning the marketers from university grounds doesn’t solve the root of the problem – credit card companies are not like teeth, if you ignore them they won’t go away. If it can be assumed credit card companies will continue to market to students (and older adults), it would be prudent to empower consumers with helpful counsel and credit education that will serve as hardened battle armour against those CapitalOne warriors who pose the question, “What’s In Your Wallet?”

Credit card companies continue to target students for a myriad of reasons; while students may have a limited income, their parents have more financial resources and can – and do, usually pay off their children’s balances. In that vein, credit card marketers have identified a need by students for instant, accessible purchasing power, and a benefit in the form of deferred payment. Students are more likely to use the card for impulsive buying or on spring break trips where it’s inconvenient to carry cash. The impulse buying translates into higher monthly interest charges, and the trips results in cash advance fees on top of monthly finance charges.

College students are also communal, there isn’t a single other point in time where an individual will be constantly surrounded by his or her peers that are continuously conversing about new products, services, or wants and needs. In other words, college students are ripe consumers whose retail synapses are firing at all hours. “Dude, I was up all night finishing my BUS-104 homework, thanks to Red Bull and my bag of Snickers.” “Oh, Red Bull – I love that stuff! I’ve been craving it all day.”

In targeting young, adult consumers, the companies are harvesting a new, continual crop of brand-loyal customers. For example, I still have my very first credit card I received almost 10 years ago from CapitalOne. Personally, I use my loyalty on a regular basis as leverage to bargain for an exceptionally low interest rate. If I hadn’t been marketed to, I would have never pursued a card, even though I knew I would need one eventually for car rentals or foreign trips where I wanted to carry a card in lieu of cash. And, if I didn’t invest the time to learn about making smart credit decisions (for example, choosing a card that doesn’t charge international transaction fees), I’m positive I would have succumbed to the statistical ranks that many others have over the past year alone.

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