NCSL LegisBrief
Briefing Papers On the Important Issues of the Day
College Students, Credit Cards & Debt, Part II
By Kelly Anders
June/July 1999
Volume 7, Number 26
Credit cards are a fact of life for many college students. They are used for many
transactions, including making hotel and airline reservations and Internet purchases. And most parents want their college-age children to have one in case of an emergency. But some
consumer advocates and state legislators are concerned that credit card marketers make credit too
easily available to young people who often have little experience handling their own finances.
Credit card issuers argue that most students handle credit responsibly. Nevertheless, issuers
are increasing their efforts to educate students about using credit wisely.
Recent studies by the Institute of Higher Education Policy and Student Monitor indicate
that some students have trouble managing their credit card debt. Generally, the chance
of accumulating high interest payments on large amounts of debt increases when students
have average credit card balances greater than $1,000, own four or more credit cards, carry over
a large balance each month, or charge tuition and fees.
This year, state legislators in Arkansas, California, Louisiana, Massachusetts, New
Jersey, Oklahoma, Pennsylvania, Tennessee, Virginia and West Virginia introduced bills to
regulate credit card solicitation on college campuses and require more information about credit
cards for college students and their parents. Many of these bills would ban gifts and
other promotional incentives, require credit seminars during freshmen orientation, require
credit card companies to register with institutions before marketing their cards on campus,
and require state boards of higher education to create rules and regulations governing credit
card company access to college campuses.
Others would require that debt education materials be inserted in shopping bags at
campus bookstores, prohibit on-campus direct marketing entirely, prohibit institutions from selling lists of names of students to credit card companies, or prevent college students from being sued for credit card debts until six months after graduation or threatened with not graduating because of a civil action or judgment for a credit card debt.
Of the 14 bills that were introduced this year, Arkansas has passed a bill restricting
card marketers from offering gifts or other promotional incentives to students under 21 who
apply for a credit card on campus through direct marketing. Card marketers must verify the age of
all applicants by reviewing valid identification, such as a driver's license.
Although some legislators are concerned about the potential dangers of credit card use
by college students, others maintain that curbing students' ability to obtain cards on
campus won't deter them from obtaining them elsewhere. And some administrators say they can't
ban card marketers if they let other companies sell their products on campus.
Currently, there are no laws to prevent the issuance of cards to students 18 and
older. However, Illinois and Montana have laws preventing the issuance of credit cards to
minors without parental consent.
Based on a survey last year of 750 college students nationwide, the Institute of
Higher Education Policy, a nonpartisan, research organization, found that:
- Nearly two-thirds of college students have at least one credit card, and one in five of
those students has four or more credit cards.
- Fifty-five percent obtained their first credit card during their first year of college. A
majority of students, 63 percent, received their credit cards by applying on their own, 17
percent received them from their parents, and 14 percent were sent credit cards by mail.
- The majority of students, 59 percent, typically pay off their monthly balances right
away. Of the 41 percent who carry over their balances each month, 81 percent pay more than
the minimum amount due.
Similarly, according to a 1998 report by Student Monitor, a market research firm
that conducted on-campus interviews nationwide of 1,200 full-time undergraduate students:
- Of students who have cards, 24 percent received cards by responding to an
on-campus display and 4 percent received them as a result of direct solicitation on campus.
- College students charge about $155 per month on their credit cards, and those who carry
a balance have an average balance of $514.
- Sixty-nine percent apply for cards to establish a good credit history, 42 percent for
protec-tion in case of an emergency, and 14 percent because they're safer to carry than cash.
Credit card issuers have several new programs to educate college students about using
credit wisely. MasterCard International, in partnership with College Parents of America,
has introduced "Money Talks," a money management education program. AT&T Universal
Card Services has awarded grants to community nonprofit, educational and government agencies
to fund credit education programs. Citigroup offers brochures, "Money Matters for
Young Adults" and "Max Moore: College Guide to Personal Money Management." Brochures from Visa include "Knowledge Pay$" and the "Inform" series. Discover offers a brochure that provides information to college students on credit card terms and responsibilities. American Express has credit information for college students available by telephone or the Internet.
For more information, visit the Web at: www.ncsl.org/programs/fiscal/nlpes/credcard.htm.
Selected References
American Express. "Managing Your
Money." www.americanexpress.com
College Parents of America. "More Advice and Info
Page." www.collegeparents.org
Discover. "Student Center." www.discovercard.com
Dugas, Christine. "Lead Us Not Into
Temptation." USA Today, March 12, 1999.
Dugas, Christine. "Students Might Need Credit
Curriculum." USA Today, March 12, 1999.
Institute for Higher Education Policy. "Credit Risk or Credit Worthy? College Students
and Credit Cards." June 1998.
Student Monitor. "Financial Services
Study." Spring 1998. www.smcinc.com
United College Marketing Services. "Get the Scoop on Good
Credit." www.collegevisa.com
Visa. "Rank It." www.visa.com
Contacts for More Information
Heather Morton
NCSL—Denver
(303) 364-7700, ext. 216
heather.morton@ncsl.org
William Binzel
MasterCard Corporation
(202) 789-5960
Institute for Higher Education Policy
(202) 861-8223
www.ihep.com
Steve Lemson
American Express Company
(212) 640-5028
Cathy McTighe
Discover Financial Services, Inc.
(212) 392-5609
Lamar Smith
Visa USA
(202) 296-9230
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