Ebook Usage of Credit Cards Received Through College Student-Marketing Programs
In the fall of 2000, the U.S. Government Accountability Office (GAO) proposed to conduct a study of college student credit card behavior using samples of accounts from major card issuers with student credit card marketing programs. This account-level empirical study was to be part of the GAO’s response to a request from members of Congress to examine a variety of issues that pertain to college students, credit card marketing, and student credit card usage. Concern over credit card marketing practices used in soliciting college student accounts led to proposed legislation at both the state and federal levels that would restrict card marketers. The members of Congress who requested the study specifically asked the GAO to gather information about whether students managed their cards and debt differently from non-student account holders.
In June 2001, the GAO issued a preliminary report on college student card usage that reviewed the findings from three existing surveys of student card usage and reported the results from the GAO’s interviews with card issuers, campus administrators, and others regarding card marketing practices (GAO 2001). The three surveys of student card usage (The Institute for Higher Education Policy 1998; Nellie Mae 2000; Student Monitor 2001) employed different sampling methods, and each produced dramatically different results on card holdings and outstanding balances. For example, the Student Monitor survey of 1,200 undergraduates reported an average monthly balance per card of $577 for students who carried a balance in 2001 (GAO, 2001). Student Monitor also found that students owned 1.55 cards on average, which implies a total credit card debt of $894 per student (Student Monitor, 2001). In contrast, the Nellie Mae survey of 256 undergraduates conducted one year earlier reported an average total credit card debt of $2,748 (GAO, 2001) for cardholders who carried a balance.
To derive a more representative database of objective (rather than self-reported) data, the GAO initiated discussions with nine major credit card issuers who expressed willingness to participate in a study of account performance data comparing college students with other groups (GAO, 2001). In a letter inviting issuers to participate (GAO, letter to major credit card issuers, October 2000), Thomas McCool, managing director for financial markets and community investment for the GAO, emphasized the importance of compiling representative account-level data. He noted that “In recent years the media have presented anecdotal reports of college students who have mismanaged their credit cards. Although sound surveys of college student credit card use have been conducted, we think that an analysis of card data maintained by card issuers would help determine whether or not college students manage their cards any differently than other card users and the extent to whichcollege student credit card debt may or may not be a problem. Such information would help inform any public debate about college students and their credit cards.” However, following the release of its preliminary report in 2001, the GAO’s plans for further study were tabled, apparently because of lack of sufficient government funding.
Nevertheless, a group of five card issuers continued discussions regarding the merits and logistics of a study of pooled, account-level data. These five companies were among the top 15 general-purpose credit card issuers in the United States, as ranked by managed card receivables at the end of 2000 (Faulkner and Gray, 2002). They agreed to provide samples of accounts to a third-party institution that would merge the data sets and produce an analysis of the pooled account data that would mirror the GAO’s proposed study plan.
In fall 2001, the five issuers provided large samples of recently opened accounts for analysis by the Credit Research Center. To comply with applicable privacy laws, each issuer stripped personally identifiable information from all accounts prior to shipment. The subsequent analysis followed the GAO’s study plan in scope (i.e., the range of cardholder behaviors examined) and shared its focus on comparing the activity of recently opened college student accounts with the activities of cardholders with accounts opened recently through conventional (non-student) marketing programs.
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