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Maroon Tiger
April 13, 1978
Giving Us Credit:
College Students and Credit
BY CAROL PINE
for National Car Rental System, Ine.
Not surprisingly, there are two divergent schools of thought on
young consumer credit. On the one hand, says a New York
banker, letting young people buy “on the cuff’ is “like teaching
the young to use narcotics.” Meanwhile, says Irvin Penner,
president of the College Credit Card Corp. (an organization that
markets-a variety of credit opportunities nationwide), young
people are the building blocks of the future. College students, in
particular, are the elite of the entire youth market, says Penner.
Penner’s firm is a “go-between”. He links college consumers with
a variety of credit interests, including Penney’s, Ward’s, Sears,
Mobil Oil and many banks across the country offering Visa
(formerly BankAmericard) and Master Charge cards. Penner’s
firm handles phone and mail solicitations for these clients. “The
college market, to us, is the credit card market,” says Penner.
“Sure, there are skeptics in this field who point to defaults on
student loans, hut that’s a different kind of credit. We have found
that the college market is a right, responsible market. We don’t
have any sophisticated Harvard Business Review studies to
prove it, hut we know from experience.”
Penner says his firm did conduct some surveys of the college
market a few years ago and discovered, in his words, “Universit.v
juniors, seniors and graduate students are indeed the real
thoroughbreds of the youth market because they go through the
rigors of qualifying.” Competing in the academic worlb
enhances those qualities that make them winners in life’s race
and concurrently make them the most desirable of consumers...
This research took eight months, but it gave us sufficient
evidence to woo upperclassmen as customers and to take the
further step of recommending to our clients that they could
modify the requirements and procedures of extending a credit
card to this special group.”
This champion of young consumer credit is not alone. N ational
Car Rental, a subsidiary of Household Finance Cgrp., launched
a major advertising effort to attract young executive renters this
year. The basic ad appeals to common frustrations that young
renters apparently encounter: “Face it,” the ad implores, “when
it comes to renting a car at most places, you’ve got problems
before you even start. Car insurance companies don’t exactly
stand in line to get your business. You attract more than your
share of attention from the highway patrol. And you’re hardly
high on the corporate ladder, so you don’t make a lot of money.
All of which could make you a credit risk. So what does this mean
when you want a car?” the ad asks, hopefully. “Do you borrow
Uncle Louie’s? Take a bus? Sometimes. But when you really need
to rent a car, we’d like to have you ask us.” The sympathetic ap
proach to young renters seems to be winning National friends.
Now, 11 percent of all credit applications approved by National
Car involve people under age 25, a significant increase over
years past.
One Arizona banker, who has awarded thousands of Master
Charge credit cards to young people 18 and up for many years,
says, “A large majority of the long-haired, bearded, unwashed
generation of the Sixties have proved quite reliable—more
reliable, in fact, than their parents.”
With mixed feelings among credit specialists, however, it’s not
surprising that young adults face varied challenges when they
seek credit. Securing a $l()0-limit junior charge card at the local
department store is one thing. Getting a large auto loan, home
loan or renting a $7,000 car for the week may be quite another. I f
a young person has not established some modest credit history,
the credit horizon can be a wasteland. “Catch-22 operates in
many credit situations,” says Ronald McCauley of the FTC.
“You generally can’t get credit until you prove you don’t really
need im A slight exaggeration, perhaps, hut not that far from the
truth. Most young people are hampered, says McCauley, because
they have unbecoming credit histories (in a situation such as
this, it appears, no history is better than a sketchy history).
“Young adults are mobile,” says McCauley. “They change jobs
and homes frequently. They’re not fully settled. A credit grantor
takes permanence into account... and no law can stop him from
doing that.”
“In many cases.” adds Mary Alice Minney. assistant
secretary-treasurer and director of education for the
International Consumer Credit Association based in St. Louis,
Mo., “Young people are familiar with credit practices because
they used their parents’ cards. But they have no established
credit histories of their own.”
Understanding that the world of credit can be confusing
Household Finance Corporation (HFC) established its Money
Management Institute more than 45 years ago. At that time, the
Institute was one of the first internal consumer education
departments known to American business. Today, says Joyce
Bryant, director, the Money Management Institute prepares and
distributes a wide range of booklets, filmstrips and leaflets deal
ing with personal and family finances. “Much of our attention is
focused on the young,” Bryant says, “because students are
tomorrow’s major consumers.” One booklet called “It’s Your
Credit, Manage It Wisely” is distributed widely to high schools
and colleges. It deals with the advantages and disadvantages of
credit, confusion about credit, how to establish credit, how to
shop for credit, how to interpret credit agreements, and how to
handle financial difficulties. The booklets are not self-serving,
says Bryant. “This is the public service arm of HFC,” says
Bryant. “A reader needs only to survey the comparison of
interest rates for credit to assess our honesty. HFC 1 rates are not
the lowest . . . and we point that out. We also explain why. "
Bryant says money and credit management educational
materials are available from HFC headquarters in Chicago for
only the cost of postage and handling.
Although young people, across the hoard, have credit
challenges, says Don Huot, consumer finance supervisor for the
State of Minnesota, single girls, students and divorced women
have the toughest time. Fortunately, the Equal Credit Op
portunity Act passed in 1975 with numerous additional re
quirements added since then will help cut down on incidence* of
credit and lending denied because of age. sex. marital status,
race, color, religion and national origin. Huot is pragmatic,
however: “Regardless of the Equal Credit Opportunity Act,
traditions are strong,” he says. “There will be lingering feelings
among creditors and lenders. Unfortunately, most people in a
position to give credit or lend money moralize too much. A lender
might not give credit for a shotgun or a snowmobile because he
thinks that’s a waste of money. So is a loan to cover a single
woman’s trip around the world. On the other hand, the cost of a
college degree is worthwhile.” In addition, Huot could also have
added, educational loans are less risky because they are largely
guaranteed by the government.
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