credit card advice
Who do you think credit card companies target the most? If you guessed wealthy people with tons of money to spend, you’re dead wrong.
Wealthy individuals may use credit cards, but for the most part, that demographic doesn’t carry a balance. They often use credit cards to get rewards, but they pay their credit cards off.
When you pay your credit card bill in full, the companies don’t make any money because you don’t pay interest or late fees.
Credit card companies profit most from people who rely on the cards and pay interest on a balance. If they rack up over-limit or past-due fees, even better. The more irresponsible the user, the more profitable it is for the companies.
Will you be surprised to learn credit card companies target college students more than any other generation?
Credit card issuers used to aggressively target college students on campus, with offers of free food, shirts or merchandise in exchange for applying.
Many students applied for credit cards in exchange for a slice of pizza, discovered how handy these cards were when they were broke and later found themselves deep in high-interest debt.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act passed in 2009 was intended to help end abusive practices in the financial industry and create a layer of transparency for consumers.
The new legislation has helped cut down on interest rate hikes and over-limit fees, among many other improvements.
One of the other changes was the addition of restrictions on how credit card companies can target college students.
“While the CARD Act has resulted
in progress, it still has a long way to go.”
One of the major rules involved banning credit card companies from conducting certain types of marketing on college campuses.
The other key piece was either requiring credit card customers under 21 to have a co-signer or to present evidence showing they’re capable of making monthly payments on the card.
Despite this legislation, it appears credit card companies are still targeting college students.
University of Houston law professor Jim Hawkins released research in the summer of 2012, which found many college students were still receiving cards despite not demonstrating proof they have enough income to pay off the debt.
Hawkins found college students were still receiving direct mail offers and gifts from credit card companies.
In an announcement from the University of Houston, Hawkins said, “My study found that 27 percent of students under 21 who were applying by themselves for credit cards listed loans as part of their income to qualify for the card.”
Additionally, according to the University, “Hawkins also found that the requirement that credit card companies disclose previously secret agreements between issuers and colleges has caused virtually no change in the number of these agreements or their terms.”
While the CARD Act has resulted in major progress — for example, credit card bills now show how long it will take to pay off your debt if you only pay the minimum balance — it still has a long way to go before it truly helps college students to no longer be targeted.
Photo source: sochealth.co.uk