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Were students really in card trouble?

By Janna Herron · Bankrate.com
Tuesday, August 20, 2013
Posted: 5 pm ET

Keeping young people out of hefty credit card debt was one goal of the Credit Card Accountability, Responsibility and Disclosure, or CARD, Act that was signed into law four years ago.

Several provisions dealt specifically with college students. For example, card issuers could no longer give away freebies on college campuses -- such as pizza or a visor -- in exchange for a student's application. And anyone under 21 now must show the ability to make payments -- translation: individual income -- to qualify for a credit card on their own.

Fast forward four years and here are the results. Only a quarter of students this year reported having their own credit card, down from more than a third in 2009, according to Student Monitor, a college market research firm. Twenty-eight percent of students carried a balance this year, down from 40 percent in 2009.

Sounds like a success. But Eric Weil, managing partner of Student Monitor, isn't convinced, mostly because the problem of student credit card debt was overblown to start with. First of all, credit cards weren't a top payment method among college students before the CARD Act, he noted. And they still aren't, even though usage has increased by almost half.

Using Student Monitor's data, here's a quick breakdown of student spending by method:

In 2008:

  • Cash: 41 percent.
  • ATM/debit/check card: 39 percent.
  • Credit card (student's and parents'): 7 percent.
  • Campus card: 4 percent.
  • Prepaid card: 3 percent.
  • Online payment: 3 percent.

In 2013:

  • ATM/debit/check card: 50 percent.
  • Cash: 31 percent.
  • Credit card (student's and parents'): 13 percent.
  • Campus card: 2 percent.
  • Paper check: 1 percent.
  • Prepaid card: 1 percent.

Weil also says credit card debt wasn't a big concern, especially when compared with student loan debt. He pointed out that only 7.5 percent of students have credit card debt that averages $500, but a whopping 70 percent of students graduate with $30,000 of student loan debt.

"We haven't seen a Student Loan Act," he quipped.

Another interesting side note is that students with credit cards have a better understanding of their creditworthiness than those who don't, even as the majority of all students say it's important to have a good credit score or credit history.

Twice as many students with a credit card in their own name were aware of their credit score than those who didn't have a credit card. And 14 percent of students with a credit card said their credit was excellent versus only 4 percent who had no card.

Does your college student have a credit card? Why or why not?

Follow me on Twitter: @JannaHerron

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