Credit card companies dangle freebies to attract students

It’s the beginning of a new semester, and plenty of people are trying to grab the attention of new students. 

Businesses, fraternities, sororities, clubs and organizations are all marketing their groups with pamphlets and Facebook ads. 

But do any of them offer a free iPod?

Credit card companies and financial institutions are descending on campus in hopes of convincing freshmen to sign up for their services. In an effort to tempt students, some are throwing in gifts, such as an iPod, T-shirt or other freebies. 

Jerry James, a senior finance lecturer in the Kelley School of Business, said students need to look beyond the allure of giveaways.

“The biggest problem with that is it creates a feeling of obligation on the part of the student,” he said. “Or, they end up signing up for a lot of cards and lose track of how much money they have in each.”

The question that remains, however, is whether or not students should use credit cards at all. 

Freshman Emily Coffman has a card linked to her parent’s account for emergencies but said she wouldn’t let her kids own one if she were a parent.

“I guess it’s a parental preference,” she said. “I wouldn’t trust my kids with one because it could ruin your credit right off the bat.”

James also acknowledges that credit cards can be a double-edged sword.

“Some people see it as free money,” he said. “The idea is to look at credit cards as a tool rather than a money source.”

If students do plan to get a credit or debit card, experts offer these tips to help navigate the maze of options:

Identify the kind of card you want
Most companies offer a card designed for students, which are aimed at those without a credit history. The interest rates are generally higher, but the chances of getting approved are also greater. Ben Woolsey, director of marketing and consumer research for creditcards.com, an online credit-card marketplace, said debit cards can be a sensible alternative.

“Debit cards can be a good choice for convenience and don’t carry the temptation to spend money that you don’t have,” he said.
But debit cards don’t carry some of the same advantages of credit cards, such as the ability to build solid credit history, he said. The cards can, however, be a good choice for managing day-to-day expenses, he said.  

Actively search for a card
It might seem convenient to just filter through the credit card offers in the mail and choose the one that sounds best. However, students should look outside the mailbox for the perfect card, Woolsey said.

“Students should shop around online before choosing a credit card,” he said. “The cards offered on campuses around the country are rarely the best deal available,”

Read the fine print
Credit card companies often put the most important details in the small print, and students should be sure to peruse these details with a fine-toothed combed, James said. Students should learn about each card’s interest rates, annual fees, late payment fees and other specifics before making a selection, he said.

“It’s all in the fine print,” he said. “But students needs to read it and understand what’s going to happen when something unforeseen occurs.”