ABA Cautions Congress Against Basing Student Credit Card Policy on Anecdotes

The American Bankers Association urged Congress Thursday to be wary of basing policy decisions on anecdotes when it comes to how credit cards are used by and marketed to college students.

Testifying before the House Financial Services Committee, ABA Senior Vice President Kenneth J. Clayton noted that despite conventional wisdom, the vast majority of students manage their credit obligations well.

“Students handle credit as well as, and in some cases better than, the general adult population,” said Clayton.  “Banks have a vested interest in ensuring that the student’s experience is a positive one, as the bank wants to build a productive, lifelong customer relationship that benefits both parties,” he said.

Citing a recent study by Student Monitor, Mr. Clayton stated that 65 percent of college students with credit cards pay their bills in full each month, a percentage that is higher than the general adult population, he said.  Clayton also noted that the average account balance for the 35 percent of students who carry a balance is only $452.

With regard to legislative proposals that would limit or prevent certain categories of students from obtaining credit cards, Clayton urged the committee to exercise caution.

“Today’s student population is very diverse,” he said.  “Restricting access to this form of credit would result in great financial hardship for most college students and their families.”

Mr. Clayton also reminded the committee that credit cards are a valuable tool for students, serving as an entry point into the world of credit, as a means for making everyday purchases and as a vital resource in emergency situations.

“Credit cards provide an unparalleled safety net for emergencies and they help students build financial skills and a credit history that will one day permit them to buy a house, get a job and otherwise participate productively in everyday life,” said Clayton. 

With regard to marketing of credit cards to college students, Clayton maintained that most students get credit cards by visiting a bank branch to begin a broader account relationship. Referring to the Student Monitor survey, he said that only 2 percent of students obtained their cards by filling out at an application at a display on campus.

Finally, Clayton said that the key to responsible credit card use lies in improvements to financial literacy. 

“Most banks that issue credit cards are engaged in a wide variety of financial literacy and school education efforts,” he said.  “But more needs to be done in this area, including improving educational efforts from grades K through 12.”
 
A copy of Clayton’s full testimony can be found on ABA’s web site.

The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation’s banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.3 trillion in assets and employ over 2 million men and women.