Decline in College-Affiliated Credit Cards (Business Insider)   Leave a comment

College affinity credit cards seem to be especially popular with the alumni of schools such as the University of Southern California, the University of Michigan, Penn State and the University of Southern California. Card issuers would set up kiosks across campuses nationwide and at college sporting events, availing students of a myriad of credit card offers, including specialty-offers like cards with no annual fee or zero interest balance transfer. Sometimes kiosk staffers even handed out giveaways like T-shirts and candy as added incentives to apply for a credit card.

Now new Federal Reserve data shows that the amount of credit cards being issued through post-secondary institutions and alumni associations is steadily decreasing. Only 1.7 million were handed out last year as compared to just over 2 million distributed in 2009. Marketing agreements between universities and card-issuing companies are also on the decline. Colleges and alumni associations earned $84.5 million from these marketing agreements in 2009, 13% more than the $73.3 they made last year.

These declines come as a direct result of the 2009 Credit CARD Act, which limits the marketing of credit cards to undergrads.  Under this law, no student under the age of 21 may obtain a credit card without first demonstrating proof of ability to make payments or have a cosigner on the account. This law also forbids the distribution of gifts in exchange for opening a new account.

“I don’t think the industry has given up on students but some colleges have eliminated students from their ongoing contracts,” said Ed Mierzwinski, director of the consumer program at the National Association of State Public Interest Research Groups.

The deals that were arranged between universities and card issuing companies provide revenue for alumni associations. In an odd conflict of interest, the more debt that cardholders carry, the greater the payoff for the colleges. The deals are financially appealing for the alumni associations but they “are not necessarily a good deal for a student without a job and without income,” says Consumer Action’s Ruth Susswein.

The manager of university licensing programs for Michigan State University, Terry Livermore, affirmed the Federal Reserve study by reporting that the university saw a decline in the number of cards issued to students through a licensing deal with Bank of America Corp even before the  CARD Act passed.

He reported that around the year 2000, “we maybe had around 10,000 student accounts. In 2007 or 2008, we had maybe 1,000. Students are coming to campus already with a credit card. They don’t need another card.”

Read more: http://www.businessinsider.com/decline-in-college-affiliated-credit-cards-2011-7#ixzz1TBAj9ZKO

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Posted July 26, 2011 by ilanamelissagreene in Uncategorized

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