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The Secret Alliance: Colleges and Credit Cards

For years, the quickest way to get a free t-shirt or pizza on most college campuses was to sign up for a credit card. At most schools, credit card booths were as easy to find as a game of ultimate frisbee.

That’s because credit card companies know what they are doing. Their research shows that people are the most loyal to their first credit card—it’s the one they’ll have the hardest time cutting up. Companies like Bank of America and Chase know that if they can get college students early—even with a co-signer, then they have a great chance of keeping them for life.

Recent credit card legislation signed by President Obama nixed some of these aggressive marketing practices. But there are still plenty of problems, because the credit card issuers won’t back down. Many schools are still aligned with credit card companies, and these companies can still pay colleges to receive access to students.

According to the Huffington Post Investigative Fund, some of the nation’s biggest and most well-known schools sell students’ personal information to credit card companies, earn royalties when students open a card and maintain a balance, make money when students use their cards, and even use their own marketing to promote these credit cards.

Now that students must be 21 (or have a co-signer) to receive a credit card, these companies have changed their tactics. Instead of credit cards, many students now use a student ID that is linked to their loan accounts. With the swipe of a card, a student can easily access that money and use it for any purpose.

Is this disturbing? Absolutely! But we’ve known for years that credit card companies and schools have a special relationship. Why else has it always been so easy—until the recent legislation passed—to find a credit card booth on every corner of the campus?

Both parties share plenty of the blame for this unholy alliance. You can blame them all day long, but it won’t change a thing. If you’re a parent, it’s your job to make sure your kid knows a few things about money before you ship him off to college. Set him up for success instead of being drowned by debt.

Sallie Mae says that 33% of college students graduate with more than $10,000 in credit card debt. Not only that, but 60% of first-year students max out their credit card within the first year. It’s pretty easy to see that our students are pros at spending money, and credit cards will only increase that activity to more outrageous levels! If you think that having parents or friends co-sign for these under-21 students will change their habits, think again.

The core of this is a behavior issue.

If you’ll teach your kids how to manage money responsibly (i.e. live below their means without credit), then you won’t have to worry about the college sharing their information with these companies. You won’t have to worry about credit card legislation or ridiculous interest rates. Credit cards simply won’t be an issue, because your young adult has already decided to not play the tricky credit game.

You’ll sleep better at night knowing that you and your kids won’t have to deal with all of this credit card nonsense and can actually focus on their education and making their hard-earned money work for them.

Two of Dave's resources are perfect for your young adult to have fun learning about managing money and building wealth. His bestselling book The Total Money Makeover is a great way to introduce them to the "weird" lifestyle, and Financial Peace University is perfect for those who are wanting to take it a step further with gazelle intensity!

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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