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Credit on campuses declined 17 in 2010
CHICAGO (8/2/11)--The number of new credit card accounts issued through colleges and affiliated groups such as alumni associations, dropped 17% in 2010, according to a Federal Reserve Board report released in July. Card accounts fell by 340,409--to 1.7 million cards in 2010 from more than two million in 2009. The Fed survey also indicated that the number of marketing agreements between credit card companies and colleges, universities and alumni associations also declined, by 41, to 1,004 agreements, a 4% drop during the same period. However, while some banks are dropping their agreements, credit unions have taken the opportunity to get agreements of their own on campus. Some analysts said the survey results reflect the implementation of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, which prevents card companies from issuing credit cards to students under age 21, unless they can prove sufficient income or have a co-signer on the account (LansingStateJournal.com July 14). The law also specifies that card issuers cannot send pre-approved credit card offers via mail, that they must stay 1,000 feet away from campus when trying to market the cards to students, and that they no longer provide incentives to students if they apply for a credit card (BusinessInsider.com (July 22). Others say that although the law has resulted in lower revenues for colleges and alumni associations, it is unclear how well the law succeeded in its goal of keeping students with little income from getting into credit card debt (Chicago Tribune July 31). A survey last fall by the University of Houston Law Center indicated that roughly three-fourths of students surveyed who are younger than 21 reported receiving a credit card offer since the beginning of 2010. The act became effective in February, 2010. Credit card companies can still contact students and offer gifts in exchange for signing up for credit cards so long as it is done electronically, and students can open checking accounts, which may lead to taking out a credit card. In 2009, banks spent nearly $84.5 million in colleges, universities and institutions of higher education to promote student credit cards. In 2010, that fell to nearly $73.3 million--a 13% drop. The number of student credit card accounts opened as a result of this spending dropped 13% also, said BusinessInsider.com. Banks are weighing the level of effort the agreements take against the number of accounts they get through that channel and some have left campus. Bank of America and the University of Illinois Alumni Association recently ended their affiliation, and a credit union has the new agreement. University of Illinois Employees CU paid $500,000 to the alumni group during the last six months of 2010 and opened more than 770 accounts, said the Chicago Tribune. Under the agreement the credit union can make six contacts a year by e-mail or direct mail with potential members who are graduates, former students, faculty, staff and university donors who are at least 21. However, it can't contact undergraduates regardless of their age, according to the alumni group. The alumni group gets $5 for each new account that stays open for at least 90 days and that's used at least once, and 1.25% of whatever purchases the member makes. At Michigan State University in East Lansing, Michigan State University FCU has a $400,000-a-year agreement that allows it to issue credit cards with MSU trademarks, said the Lansing State Journal.


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