Credit card companies spent more than $83 million last year marketing their cards to college students through agreements with colleges and alumni associations nationwide, according to a report from the Federal Reserve.
The report, required by the 2009 Credit Card Accountability, Responsibility and Disclosure Act, mandates the disclosure of all agreements between credit card issuers and college-affiliated organizations, said Josh Frank, senior researcher at the Center for Responsible Lending. These organizations include alumni associations and athletic foundations, as well as the colleges themselves.
The 1,044 different agreements accounted for a total of $83,462,712 in payments from credit card companies, according to the report. Those companies were able to secure 53,164 new college credit card accounts, bringing the total to 2,008,714.
FIA Card Services, an affiliate of Bank of America, claims the majority of these totals, spending about $62 million among 906 agreements to secure $1.6 million college cardholders. Chase Bank was a distant second, spending $13.9 million on its arrangements with schools.
U. Illinois was the top beneficiary, earning $3,272,457 in an agreement with FIA. Meanwhile, the Penn State Alumni Association, the second-highest earner at $2,835,000, boasts the most cardholders at 74,832. The top 10 highest agreements combined for a total $18.3 million, and each individual arrangement totaled more than $1 million.
The University Alumni Association did not report receiving any payments from credit card companies, despite maintaining agreements with FIA and Chase Bank.
The nature of these agreements varies between organizations and includes fixed fees as well as additional fees per account holder signed, Frank said. Some agreements even reward universities as their students compile more debt, Frank said.
“That is really problematic in my mind because the University is actually making money for something that they should not really have an incentive to do, which is get their students and alumni into debt,” Frank said.
Frank also noted that credit card companies value campuses as fertile ground for new and loyal clients, noting that campuses serve as a “ready source” of prospective lifelong cardholders.
“There is evidence that students stay loyal to the first credit card they get. They tend to use that one long-term and keep it,” Frank said.