As part of the 2009 CARD Act, opening a credit card as a college student became far more difficult. Now more than two years after the bill was passed the public can see the effects of regulatory reform. Overall, it's not good for credit card companies.
According to a report released by the Consumer Financial Protection Bureau, the number of college credit card agreements between banks and colleges dropped precipitously in 2011. The data shows that the number of agreements plummeted to 798 in 2011, down from 1,005 in 2011.
The number of new signed agreements was not the only change in the college credit card business. Colleges also recorded lower revenues from credit card agreements, reporting that their share of the earnings fell by more than 15%. As a whole, credit card companies collected more than $62 million in 2011.
Traditionally credit card companies have partnered with colleges and alumni organizations to offer special credit cards to their graduates. When the cards are used, a portion of the fees generated from processing fees is distributed back to the college or association. Historically, this has been a huge haul for colleges looking to expand their brand and find new ways to generate revenue. For alumni and current students, college credit cards give them a way to give back to their school with no cost out of their own pocket. While such cards rarely offer rewards, the savings is donated directly to the school represented on the face of the card.
College credit cards may be harder to pitch in an time when credit card companies are disallowed from marketing to people younger than 22 years old. This means that credit card companies will only be able to sign up new college credit card members after graduation, or when they have ample income or a parent's signature. These barriers to entry, though slight, have obviously had a tremendous effect on the college credit card and vanity card business.