Consumer Finance: College Students and Credit Cards

Credit cards offer clear advantages to college students because they provide an interest free loan until the payment is due and a convenient noncash payment option for both routine transactions and emergencies. If used responsibly, credit cards allow students to build up credit histories that will increase their access to credit in the future. However, if college students have not learned sound financial management skills in high school or from their parents, the disadvantages of credit cards can outweigh the advantages. GAO found that more than one-third of students had credit cards before they entered college, and another 46 percent acquired them during the first year. Except for charges for tuition and fees, their spending patterns resembled those of nonstudents. GAO did not find a uniform response to the controversial issue of on-campus credit card marketing among the universities GAO visited. In response to complaints about aggressive marketing techniques, a few universities have restricted credit card solicitation on campus. The credit card issuers that responded to GAO's inquiries participated actively in the student market, but they did not have a uniform set of policies or practices.