Every year at registration millions of college students begin their journey into inescapable credit card debt to get a free beer mug, Frisbee, or t-shirt.
In this post:
Incentive Marketing to Innocent Students
If you have been on a college campus in the last 20 years on registration day, you have probably seen table after table of credit card vendors. Each of them has a different offer, an incentive, to give the student the needed encouragement and energy they need to fill out a credit card application. Many of those colorfully festooned tables feature appealing-looking upperclassman hawking the importance of “building a good credit score”.
Yes, a good credit score needs to be built and you need to start sometime. Common sense would dictate that sometimes would be when you have a job and have the capacity to pay back the loan. That’s right, students, credit is not a gift, it’s a loan – a loan you have to pay back.
Irresponsible Marketing with Deadly Consequences
Too much unnecessary credit, too early, has mortgaged the future of too many financially illiterate, innocent college students. Consider the tragic story of college honors student Sean Moyers who, at 21, killed himself over $10,000 of credit card debt. For many students, the emotional damage that comes from too much debt is literally unbearable. Mitzi Pool was another college student who made the national news after taking her life over the shame of her credit card debt. Research is pointing to the fact that more students are now exiting college because of economic rather an academic failure.
As students lay down their newly acquired plastic and run up $500 bar bills they soon learn the magic of minimum payments. What’s this? All that beer and pizza and the bill is only $10 this month? What the innocent college student fails to realize is that at 18% interest and paying only minimums it will take seven years to pay off that $500 with an additional $365 paid in compounding interest.
Why do colleges permit the marketing of credit cards on campus? The college, whose logo is typically part of an “affinity group” design, is paid a small percentage on each transaction. Many colleges and universities are making millions of dollars in marketing fees as a reward for the permission to market on campus.
Financial Literacy and High School Students
As if it isn’t bad enough that college students are aggressively marketed on day one of their academic life, the marketing of high school seniors has now begun. Why fight for market share on registration day when you can have that card ready to swipe on day one. Financial literacy courses are nearly unheard of in high school. Course work on budgeting, interest rates, the time cost of money, negative amortization, and other fundamental financial concepts are nearly non-existent in public or private school education.
Teach Your Children the Fundamentals
If you are the sort of parent who has tackled the issues of drinking, drugs, and sex with your teenagers, how hard could interest rates be? Even if your local high school has no curriculum on financial literacy, excellent study guides, and free material may be obtained through the Jump$tart Coalition for Financial Literacy. The hour or two spent teaching the fundamentals to your freshman may save your child a lifetime of credit card woe. It might even save their life.
