Students have been increasingly targeted by credit card companies and lawmakers are finally starting to notice. Times may be difficult for homeowners, but teenagers with no credit or job history are finding it easier than ever to get approved for a credit card and start spending like there is no tomorrow. The House Financial Services Committee is now holding hearings to address these problems and affect changes.
The legislative panel is led by Representative Carolyn Maloney and will be hearing from the credit card industry and consumer advocates including the U.S. Public Interest Research Group. Research has shown that students are targeted and bombarded by credit card company solicitations in the mail, phone and while walking on campus. The research group found that 80% of students said they received direct mail from credit card companies and 22% received four phone calls a month.
Credit card companies are also offering freebies like t-shirts, pizzas or beach chairs to get students to apply for credit cards without thinking about what they are doing. This combination of strong marketing and lack of financial experience on the part of the students leads to many of them finding themselves in serious debt. Worse, many of these students are then unaware of how serious their problems will become in the future.
The average outstanding balance on an undergraduate’s credit card stands at around $2,169, according to Nellie Mae which provides student loans. Nearly 56% of undergraduates get their first credit card by age 18 and 91% of students have at least one credit card by their final year. And by graduation, 56% of students carry four or more credit cards. Clearly, this is a problem that should be addressed now before these adults run into real problems.
Credit card companies like students because they are a relatively untapped market. Many of them hold onto the same credit cards into adulthood while college graduates typically earn enough money to eventually pay off their debts. So, all of the interest being accrued while in college is paid off and they keep the card longer – the perfect customer. Indeed, many students handle their debt much better than the average adult population.