Recent financial regulations at the federal level have made it extremely difficult for credit card issuers to market to college students, and now many are finding new ways to forge financial relationships with young adults.
These days, a large and growing number of major credit card lenders are now marketing on college campuses once again, but are offering young adults prepaid cards instead of the type that can lead to large amounts of credit card debt, according to a report from Dow Jones Newswires. One of the most common ways in which these lenders are doing this is by partnering with the universities themselves to make student IDs their own prepaid cards that can have money loaded onto them.
For instance, U.S. Bancorp recently struck a deal with North Carolina State University to issue the new "Wolfpack One Card," which allows student IDs to have cash loaded onto them from traditional, existing bank accounts, the report said. U.S. Bank has similar agreements with more than 50 colleges across the country. Likewise, American Express struck a similar deal with the University of North Florida last November.
Ostensibly, this will increase convenience in making purchases for college students both on- and off-campus, since the cards carry the logos of major card issuers like Visa, MasterCard and American Express, the report said. This means that they will be accepted not only by school-operated businesses like dining halls and bookstores, but also traditional off-campus businesses.
It's about building association
For lenders, the deals make a lot of sense, the report said. Because they cannot market credit cards to young adults as easily as they once could, such as offering perks like a free t-shirt or other items just for signing up, they instead offer prepaid cards as a way of creating an existing financial relationship with young consumers. This way, they already have the contact and financial information for young adults when they turn 21 (the age at which they are no longer restricted by federal regulations).
"There are banks and card companies who have taken a look at that said, 'Well, we can't do credit cards on campus anymore, but we'd still like to develop a relationship with students,' so they offer prepaid cards as a way to do that," Ben Jackson, a senior analyst in the prepaid advisory service at Mercator Advisory Group, told the news agency.
Another strong benefit of this type of card that other prepaid cards may lack is that they do not carry many of the fees for which this type of payment method is often criticized, the report said. Certain things, such as ATM withdrawals, monthly paper statements, and account inactivity, will still incur a small fee.
Consumers who want to protect their finances in any way should take the time to check their credit reports regularly. Doing so might allow them to spot any unfair markings that may be having an adverse effect on their credit standings.