Prohibition of On-campus Credit Card Marketing - Case Study Example

Prohibition of On-campus Credit Card Marketing Introduction The credit card culture spawned a debt-dependent society. Today’s generation did not escape it. Despite the actual risks of credit card consumption, modern society still regards credit cards as valuable assets in personal financing. College students have been the new consumer market in the credit card industry. Because of on-campus marketing schemes of credit card companies, there has been a skyrocketing demand for it and which is often beyond the rational level. Although credit card companies have already targeted various market segments, their exploitation of younger groups raised credit controversies. These promotional schemes are often pervasive and deceptive. Dr. Robert Manning explains that their naiveté on personal financing and materialistic culture make them lucrative for the credit card industry (as cited in Arnold, 2008, p. 156). However, it is exactly for their economic positions that they are potent in weakening the economy largely. Hence, on-campus credit card marketing that commonly leads to immature and unhealthy credit card consumption should be prohibited. The Credit Card Industry Like physical money, a credit card is a negotiable instrument (Thoms & Walden, 2008) which can be used for any type of purchase; only that it is a plastic card with a magnetic strip (Pollick, 2010) and its convenience makes it popular for different consumer groups. Credit cards are the most profitable line of banking. They yield higher returns than any other forms of banking (Cackley, 2010) which is why credit card networks have to expend much on creating the need through advertising and marketing (p. 24). In fact credit card giants: VISA, MasterCard, Discover, and American Express spent approximately US $8 billion in marketing alone for fiscal year 2009. Marketing to College Students The younger demographic easily develops brand loyalty and is less repulsive even to sloppy marketing schemes (as cited in Arnold, 2008, p. 156). With this train of thought, credit card companies have perceived that college students are a profitable market segment. However, these firms tend to become more and more invasive in selling credit cards to this new segment. In a 2008 study, the US Public Interest Research Group (U.S. PIRG) indicated that credit card companies would either station in schools and universities or collaborate with alumni associations where they could collect student information which are oftentimes sold (USPIRG, 2008, p. 8). In fact, credit card companies often have to pay colleges to peddle their products and services to these students. Whether on-campus or off-campus, marketers would often coax students into signing credit card applications by giving away incentives (i.e. sport toys, shirts, mugs or water bottle, pizza) (USPIRG, 2008, p. 3). These unfair practices provide easy access that result in the rise of unhealthy credit card consumption among college students. Sallie Mae, a U.S. financial consulting company for education, conducted a study in 2009 indicating that only sixteen percent of undergraduates don’t own credit cards (“Study finds rising,” 2009). It further showed that fifty percent of those who own credit cards posses four or more cards. While it is true that college students are already fit to contract, they also lack the fundamental knowledge in financial planning and management. In the above study, eighty-four percent of undergraduates admitted that they lacked financial education (“Study finds rising,” 2009). Credit cards are a lot difficult to manage than the physical money. The former only provides an abstract concept of the actual financial capacity or resources of its consumer. With their invasive marketing efforts, credit card companies create the mindset that with easy credit, anything is possible for purchase in spite of the credit card limit. Added to their financial illiteracy, college students have the propensity to misuse their credit cards than other consumer groups. Credit cards have become an addictive though “necessary” tool to survive the college life. Marketers would lure students with the demands for tuition and other school fees. They would also deceive their potential consumers of initially low interest offers while contrive in informing them of the “real” or permanent interest rates. These are obvious devises of profiteering. Worse, they would only sell credit cards without even examining the customer’s credit history or ability to repay debts (USPIRG, 2008, p. 11). Because of these issues, credit cards have instead become a persistent burden among college students. They have become unjust trades that result in massive penalties and fees. Credit cards can be very beneficial to its holder when handled wisely. Nevertheless, they also encourage impulsive buying behavior. Cardholders tend to become insensitive to price and go beyond their purchasing powers. Some would even use their credit cards on a daily basis. A research study had shown that forty percent of the cardholders purchased items which they knew they could not afford (“Study finds rising,” 2009). Additionally, since most of these cardholders are jobless or have no reliable source of income, they have no or less capacity to repay debts. In effect, they easily incur long-lasting debts which they had to carry in their credit histories even after they graduate (USPIRG, 2008). As a matter of fact, seven percent of students dropped out of college due to debt and/or financial pressures. As credit card consumption increases, the number of students who are tied up in credit card debts also increase. Undergraduates would incur an average credit card debt of $3, 173 (as cited in “Student credit,” n.d.). Indeed, since college students generally don’t have the financial means to settle payables for which they are legally responsible, they have become the fastest-growing demographic to file for bankruptcy (“College Student Bankruptcy,” n.d.). The American Bankruptcy Institute reported that college students represented nineteen percent (19%) of all those who filed for bankruptcies (as cited in Klick, 2010). In the aforementioned Sallie Mae study, seventeen percent of undergraduates only made payments on regular monthly basis while one percent resort to guardians as remunerators (“Study finds rising,” 2009). Conclusion The credit card market makes for a profitable business especially in a materialistic society. However, ethical trade practices are always of the essence of exacting business. Not only are these unfair credit card’s marketing schemes aggressive, they also entice students to develop unhealthy habits of accumulating debts which may have lasting effects. College students are a vulnerable demographic. They easily lavish away even beyond their resources. That is why credit card companies should educate not only young consumers but all credit card consumers about responsible financial management where responsibility is critical to the growth of the economy. References Arnold, C. (2008). How you can profit from credit cards: Using credit to improve your financial life and bottom line. New Jersey: Pearson Education. Cackley, A. (2010). Credit cards: Rising interchange fees have increased costs for merchants, but options for reducing fees pose challenges. USA: Diane Publishing. College student bankruptcy. (n.d.). Retrieved from http://www.totalbankruptcy.com/news/articles/credit-cards/ college-student-bankruptcy.aspx Klick, B. (2010, March 4). Card act causes credit controversies. Retrieved from http://media.www.psucollegio.com/media/storage/paper437/news/2010/03/04/ CampusLife/Card-Act.Causes.Credit.Controversy-3885612.shtml Pollick, M. (2010, Oct. 19). What is a credit card? Retrieved from http://www.wisegeek.com/what-is-a-credit-card.htm Student credit & debt statistics. (n.d.). Retrieved from http://www.credit.com/press/statistics/student-credit-and-debt-statistics.html Study finds rising number of college students using credit cards for tuition. (2009, April, 3). Retrieved from https://www.salliemae.com/about/news_info/newsreleases/ 041309.htm Thoms, P., & Walden, M. (2008). Battleground: Business. Westport, CT: Greenwood Publishing Group. USPIRG. (2008, March). The campus credit card trap. US: Mierzwinski, E. 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