One of the primary goals of the 2009 CARD Act was to significantly cripple credit card companies and their efforts of wooing college students via tables set up on campus with free gifts for those who applied for new credit cards.
Now, though, there’s a new marketing effort – prepaid cards. And it’s all legal – and it’s working like a charm. College students are in the bull’s eye once again, this time, though, the risks are fewer. One of the biggest supporters is American Express and it’s introduced its own product for college students.
Campus Prepaid AMEX
The Campus Edition Prepaid Card by American Express was unveiled this week. It’s a reloadable, prepaid card and it’s available for college students online and at more than 500 college bookstores. It’s considered safer college students since there are no concerns about overspending or walking out of college with a shoulderful of debt. The cards function much like a debit card but are not linked to a checking account.
This is a move that’s taking place not only with American Express, but the other big credit card companies. In fact, an increasing number of banks marketing prepaid cards these days. It’s a fine way for these institutions to bypass the regulatory restrictions in the 2009 CARD Act, which limited the marketing of credit cards on campus and restricted lending to customers younger than 21.
Some are surprised by this move since there are significant regulations in that same law that prepaid debit cards, along with checking account debit cards less profitable. The fee restrictions angered more than a few banks and card companies. Now, though, they’re looking for new ways to sweeten the bottom line.
Ah, but there’s a catch. As mentioned, these cards are available at more than 500 bookstores that are run by Barnes and Noble. The American Express Campus Edition card costs $4.95 to buy in person and it’s only a temporary card and cannot be used at any ATMs. To load it with money, students will pay around $5 via GreenDot MoneyPak and in rare circumstances, that fee may be refunded.
For those students who seek the card online, they’re going to find a much better deal. That option is to order a free personalized card online. Once it’s received, the student can then go into the bookstore and load it with funds, again, via MoneyPak. There, they’ll still face the fees, but students can also get money loaded at no cost via online bank transfers (which is ideal for parents and grandparents). Direct deposit is another option if the college student is employed.
Here’s where it gets a bit confusing. The prepaid debit cards can be used at ATMs; however, and like most other things on college campus, it’s soon going to cost money to do so. The first monthly transaction via ATM is free, but after that, there’s a $2 fee for every withdrawal at a campus ATM. Those fees might even be higher off campus.
Traditional Cards for College Students
So what’s the best option for college students? Many parents feel their young adults are responsible enough for a traditional card and to that end, there are many products available, including the Capital One Journey Student Rewards card. There’s no annual fee, though the APR is 19.80%.
Here’s what we like about this Capital One – it’s designed to help college students learn responsible credit habits, including monthly access to their credit reports and built in tracking tools that allow them to see where they’re spending their money. A 1% cash back bonus on all purchases, along with a 25% bonus each month their bill is paid on time makes this a great tool for students and their parents.
Another smart choice designed for college students is the Discover Student Card. Again, this is ideal and custom made for today’s college student (and it’s also great for giving Mom and Dad peace of mind). This Discover comes with that awesome rewards program and there’s even a cashback bonus with the first purchase, provided it’s made within the first 90 days of the card’s approval.
There’s also a 0% APR on purchases for the first six months and then the standard APR falls between 12.99% and 18.99% kicks in after that. For those who love the Discover Cashback Bonus categories that rotate every three months, there’s a good chance they’ll like the idea of that on their student’s credit card too and with this Discover offer, you get that.
Both cards have $0 liability, no annual fee, online account maintenance, text and email alerts and a host of other attractive bells and whistles that any college kid will appreciate.
The difference in the AMEX prepaid student card and the Discover and Capital One traditional cards is you might see an AMEX table on campus hoping to lure students in. Of course, the new laws prohibited the traditional credit card offers from hitting a campus near you.