Credit card companies eager to target college students

It seems like something out of a dream: envelopes that magically appear in college students’… It seems like something out of a dream: envelopes that magically appear in college students’ mailboxes, conjuring dreams of financial freedom and worry-free spending.

Some students tear up the applications, while others rush to fill them out. Either way, credit card solicitations are everywhere. Whatever the reaction, knowing some key facts can help students make decisions about their credit future.

According to recent statistics posted by United College Marketing Services, the average college student receives 25 to 50 credit card solicitations per semester. These statistics also show that 70 percent of students are likely to keep their first credit card, which explains why companies are eager to sell their cards to college students.

“They’re really trying to get their credit card into the student’s hands first,” Oren Milgram, director of student affairs at StudentMarket.com, said.

The Web site, which was designed by Milgram and a group of fellow college students in 1995, offers various services to college students, including advice on credit management.

“I think the undergraduates today are smarter financially entering college than they were in 1995,” Milgram said. “They’ve been learning more about being responsible.”

Milgram said that there are more products nowadays, such as debit cards and pre-paid credit cards, that have familiarized students with the idea of credit. Still, some students may question whether college is the appropriate time to sign up for a credit card.

Milgram said that college students can be persuaded to sign up for a credit card for the wrong reasons. Many tables across campuses offer free merchandise as an incentive for students to sign up for a card.

But signing up for a credit card on a whim can be a big mistake. According to a 2005 study conducted by Nellie Mae, “the average outstanding balance on undergraduate credit cards was $2,169.”

Fifty-six percent of college participants reported getting their first card when they were 18.

College students may seem like unlikely candidates for credit cards, but an article on Bankrate.com reports that credit card issuers target college students because they are likely to stick with the same card after they graduate. Also, issuers realize that many students can rely on their parents to rescue them from missed payments and large balances.

Students who don’t have this luxury should be wary about signing up with a card too soon.

“Your credit is your financial reputation,” Milgram said. “I think students sometimes overlook the fact that their credit score can be used by lenders as well as employers.” For these reasons, students should look at some key factors before choosing a card.

Milgram advised that students look for cards with a low interest rate and no annual fee. If possible, students shouldn’t carry a balance on their account, and acquaint themselves with the meaning of important terms such as a grace period.

The benefits of being responsible pay off, Milgram said, adding that if someone with good credit has a balance and the interest rate goes up, many lenders will be flexible in offering a low interest rate.

Milgram said that students should start by just putting essential expenses on their card. He suggested that students make a budget and try to stay within it. Making logical money decisions now can help students take a proactive stance in their financial future.

“Don’t spend what you don’t have,” Milgram said.