June 08, 2010

• It's The Law; But Who's Counting?, Pt.3
    Justifying good business, valuable services, grants and scholarships.

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  Another big player in the affinity credit card market is the Bank of America, the second largest general purpose credit card issuer in the U.S. Bank of America acknowledges that it has affinity card contracts with nearly 700 colleges, universities and alumni associations. Brown University, The University of Connecticut, Stanford University and Michigan have all signed contracts with Bank of America. These contracts award Brown University $2.6 million over a seven year time period, Stanford $7 million over a seven year time period and Michigan receives a whopping $25.5 million over an 11 year period. Bank of American believes that these organizations deserved to be rewarded for their role. The typical contract pays colleges, universities and alumni groups $1 for each student who opens a credit card account that remains open for 90 days.

  Furthermore, it is speculated that more than a 100 additional colleges and universities are believed to also have signed contracts with banks to issue school branded affinity credit cards. These are huge numbers when you consider the amount of debt the average college student acquires. Recent research conducted by the student lending company Sallie Mae, indicates that the average college senior graduated with more than $4,100 in credit card debt. That number has climbed from the $2,900 average in 2004.

  Schools and the banks have their own justifications for marketing the affinity credit cards. Banks say it's good business to begin building relationships with future customers. Financial institutions also say they are providing a valuable service to college students who have few resources and need funding in order for them to reach their educational goals. On the other hand, schools say that by selling student lists to the banks provides them with funding so that they can continue to offer students with scholarships and grants. Furthermore, banks, colleges and universities argue that issuing credit and debit cards to college students helps promote a learning experience in fiscal responsibility.

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