We’ve passed laws to protect college students from foolishly compiling a mass of credit card debt. They also protect themselves by seeing through old-school advertisements that try to manipulate their spending habits. So does that mean today’s generation of college kids has figured out a new way to “drop out”? Not a chance.
One reason the new credit card regulations were created was to protect young people—students especially. Banks are no longer allowed to inundate college kids with enticements to sign up for credit cards. Today, no one under 21 may have a credit card without a cosigner, or without demonstrating proof of income. In other words, no clueless college freshmen can get a credit card—and start piling up debt, late fees, and a bad credit history—without Mom and Dad knowing about it.
But banks and card issuers are crafty. They always seem to have a new bag of tricks ready when the old ones are banned.
So what is replacing the trusty old credit card on campus? The Washington Post reports that college students all over the country are automatically receiving plastic cards emblazoned with the logos of both MasterCard and the college they’re attending. This is not a credit card. So what is it? The WP explains:
Instead, it is a new type of plastic that allows students to easily access money from their college loans everywhere from the bookstore to the bar with the swipe of a card.
At some colleges, every student gets one of these cards, which double as school IDs. Students don’t have to activate them, but if they follow the directions when card arrives in the mail—and the letter typically comes with official university letterhead—that’s exactly what students will do.
These cards are basically debit cards, which are linked to accounts created for student loans—money intended for housing, books, and such—or they’re linked to accounts created the old-fashioned way: a deposit. So the risks aren’t the same as a classic credit card, in which a student could easily spend money he doesn’t have.
But there are risks with these loan/debit cards, most of which come from a Connecticut-based bank called Higher One. Notably, and naturally, there are fees. There’s a 50¢ fee for using a PIN rather than a signature when making a purchase with the card, and there’s a $2.50 charge for getting money out of another bank’s ATM. And whereas inactivity fees for credit cards have been banned, the debit cards marketed to college kids will actually charge a student $19 a month if he or she doesn’t use the card for nine months. Yep, there’s a regular fee for inactivity—for doing nothing.
Why do colleges jump on board with these bank products? From the WP:
Schools say the program helps students get access to their loans more quickly and conveniently. Some college administrators say many of their students do not have bank accounts and, before Higher One came along, relied on expensive check cashers to access their loans.
Sure, there’s that. Also, the colleges get a piece of the action when it signs a contract with a bank and implicitly endorses its products.
Meanwhile, college students are also feeling the marketing push from folks you might not expect: other college students. USA Today describes the creative new ways companies are trying to reach out and make loyal customers out of college kids—who increasingly are assumed to be immune to old-school TV and print ads.
Companies like Red Bull and American Eagle have hired students at colleges around the country to be reps for their products. They’re hired on the cheap (a max of $1,500 worth of products or cash) to hand out freebies and coupons, post messages and spread the word about promos using social media, and generally convince their peers of the coolness and worthiness of the products at hand. It is not difficult to see why companies are trying to reach college kids, but USA Today lists three reasons here:
•Students have money to spend, often courtesy of Mom and Dad. Discretionary spending by the nation’s 19 million full- and part-time college students will reach $76 billion this year — up $2 billion from last year — Alloy Media + Marketing projects.
•Students will have more dough in the future.
•Students, particularly freshmen in their first extended time away from home, are developing brand affinities that can last.
In other words, companies want to influence these kids to spend money now, and to continue spending money down the line, on their products. And the companies are using students’ consumer peers to accomplish the goal. Simple as that.
College has always been considered a time to help young men and women prepare for the “real world.” Being surrounded by non-stop marketing is part of modern-day life now, so I suppose this is one way students will see what it’s like for today’s consumers. They’re get to feel what it’s like to be a pawn in a game played by big corporations and marketing machines. I just hope they’re smart enough to realize when they’re being played, and that it’s not too late when they decide to tune out of the game.
But back to the loan-debit card thing. I suppose using this kind of card will also expose students to the way “real” people spend—and all too often, how real people develop financial problems. The more I think about it, however, the college experience seems less and less like the real world. What with the rock-climbing walls on campus and dorm amenities aplenty, the experience seems more like a vacation at an all-inclusive resort, or a cruise ship—which both, by the way, use cashless systems in which guests can charge whatever they want with a swipe. That sounds like college too.
Sure, one reason these entities use cashless systems is for convenience. But don’t kid yourself. That’s not the main reason they stopped using cash. They understand that people will spend more (and think less) when they’re swiping a card rather than counting out the greenbacks one by one.
The question is: Do 18-year-old kids understand this as well?
Read more:
College by the Numbers
How Private College Is Like a New Car
Questions About College: Where Does the Money Spent on Tuition and Fees Really Go?