New laws, including the infamous CARD Act, make accessing credit cards more difficult for college students. But the new law won't make plastic completely inaccessible - where credit cards have dropped off, prepaid credit and debit cards are picking up the slack.
Prepaid debit cards help fill two voids that credit card companies and colleges hope to fill. For one, colleges want to give their students access to easy spending vehicles. Secondly, universities want to simplify the financial aid process. By giving students access to prepaid cards, money from loans, scholarships, and grants can be easily distributed electronically. What used to require thousands of printed checks now requires the simple click on a computer to initiate thousands of funding transfers to students.
The University of North Florida recently rolled out a new program that would turn any student’s college ID into a prepaid debit card. The ID looks very much like any other debit card, complete with a magnetic strip that deducts funds against a student’s balance. The program is intended to make it easier for students to use their aid packages, even if they do not have access to a traditional checking or savings account.
American Express is making its own moves into the prepaid credit card business. The company launched a prepaid debit card to be sold on more than 500 campuses in Barnes and Noble bookstores. The prepaid card is inexpensive, carrying a small $4.95 monthly service charge for frequent users.
Prepaid debit and credit cards fill a void where traditional banks cannot. Many students go to college without a car – some without a permanent address, a requirement for a bank account in any of the 50 US states. By issuing a prepaid debit card to students, colleges skip many of the necessary requirements for basic banking services with a revenue positive solution for the school.