When I was in college, it was very common to see credit card companies set up a booth on campus.   They would be at the games, in the student centers, and outside the cafeterias.     Typically they would be giving away a t-shirt, a sports bag, or some other piece of inexpensive merchandise.    In my naive youth, I probably signed up for more than one.   I remember thinking that it couldn’t hurt.   I just fill out some sheet of paper, and go home with something for free.

That was long before I became a reward card guru.    These days I limit myself to only applying for credit cards that offer a substantial sign up bonus.    I am talking hundreds of dollars worth of points or miles.    Now, I just chuckle when I see some trinket being offered in exchange for a credit card application.

My practices have changed, but the banks habit of targeting college students have not, but they are about to.   My home town newspaper, The Denver Post has an article about how credit card companies are marketing to college students for one last full semester until the CARD act takes effect.

Starting in February, credit card applicants under 21 will actually have to prove they have income.     What a thought!    If they can’t, they will have to have a co-signer.

“More A Learning Tool Than A Credit Vehicle”

Why would credit card companies want customers who can’t pay their bills?   Lots of reasons, all very cynical.   First, if they can’t pay their bills now, they can always pay them later.    In the mean time, they can rack up interest and fees.      College students, as we know, are likely to earn more than their peers who don’t attend college, so they are a great long term customer.      There is also the fact that when they are in college, people develop habits with their personal finance that last throughout their lifetime.    What better time to teach people that it is cool to run a balance on their credit card?    They all but admit this practice.   In fact, as the spokesman for Wells Fargo, the largest bank in Colorado explains “Our cards are more a learning tool than a credit vehicle.” What are they learning?   According to the article, the average college student graduates with over $4,000 in credit card debt.  Talk about learning something the hard way!

Of course, many students get in debt over their head and cannot pay off their cards.    The credit card companies have been counting on them turning to their parents to pay off their purchases.

The new rules are a godsend.     I am not in favor of treating young adults any differently, but clearly, something must be done to keep banks from going after college students in a predatory manner.   No one should be extended credit unless they have a means to pay it back.     I am in favor of these rules because it wouldn’t bother me if they applied to all borrowers, not just those under 21 years old.

What College Students Should Do

Learn to use credit cards as a method of payment, not a method of finance.    Learn to use your card responsibly.    That means setting a budget and sticking to it.   Look up your statement online frequently to keep track of your spending.  That way, the bill won’t surprise you when it comes in the mail.   Keep only one credit card at a time, for simplicity sake.   I would start with a card with no annual fee, preferably from a bank you already have a checking or savings account with.    That keeps things simple.   If they give you a reward, great, but don’t focus too much on it.   The last thing a college student needs is to be rewarded for spending more money.     Get in the habit of always paying your bills on time and in full, every month.    College students have no excuse for not paying electronically, unlike some of their less tech savvy parents.    Electronic payments are much easier and cheaper, while being more reliable and verifiable.    Unlike snail mail, nothing arrives late or gets lost in the mail.

The CARD act is a great step forward, but ultimately students will have to start themselves down the path to financial responsibility.