As the name suggests, a university credit card is one in which the college or university has allowed one particular credit card company to offer a card in their name and to advertise on campus. The deal is exclusive; only one credit card company gets these benefits. Furthermore, the credit card company gets access to lists of students and alumni to whom they can advertise. In return for this exclusive relationship, the college receives a fraction of each purchase made with that card. Thus, if Bank of America has a deal with, say, Brown University, only Bank of America can advertise on campus, Brown University will give out contact information to Bank of America on its current and former students, and in return, Brown University will get some money every time someone uses the Brown University credit card.
If the relationship between universities and credit card companies was structured differently we would not be against school sponsored credit cards, but a school’s first responsibility should be to its students. More specifically, the university should not encourage its students to accrue unwanted debt, and instead it should educate them and help them reach the best decisions for themselves.
Unfortunately, the current relationship between a school and a credit card company, sets the university at odds with the welfare of it’s students. First, it eliminates competition: only one credit card company is allowed to advertise to the entire student body. Second, the university gains money whenever students spend. The student demographic has a strong tie between the number of purchases made and the probability that a balance will be carried from month to month. Therefore, the university indirectly benefits most from students who are in debt and who accumulate finance charges.
Even though, we are in complete disagreement with the part of the new credit card bill that does not treat consumers between the ages of 18-21 as adults, we are happy to see that the bill contains at least two provisions that will help students realize that their university credit card is not the only option when it comes to student credit cards. More specifically, it does not allow credit card companies that market their cards on campus to offer any tangible items in order to induce students to apply for a credit card and it requires greater public disclosure from all the schools in regards to the nature of their agreements with the credit card companies.