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A soon-to-be-published research study from Jim Hawkins, an assistant professor with the University of Houston Law Center, found that qualifying for credit cards may be easier than ever for college students thanks to new marketing tactics used by card companies.

The study also found that a lack of financial literacy may be hurting all young adults, including New Jersey students, as they make choices that could damage their credit.

Students Use Loans as Income to Qualify for Credit Cards

Despite the Credit CARD Act prohibiting card companies from aggressively pursuing college students or individuals under 21 years old as credit card customers, students from the University of Houston and Baylor University in Waco, Texas report that banks continue to market to colleges.

The card companies are reportedly sidestepping the law while simultaneously creating financially dangerous circumstances for students by making it easier for them to qualify for credit cards.

The tactics banks are using to market to students include mailing credit card offers and visiting campuses despite these acts being illegal. Even more shocking is that students are able to list their student loans as income on their applications to help them qualify for credit cards.

Lack of Financial Literacy is Hurting Students

The report found that a lack of financial literacy has a severe impact on the students being approached by credit card companies. Many don’t understand that their decisions can have a significant impact on their credit and affect their ability to make major purchases in the future.

Among those surveyed, the research study found that 27 percent of students under the age of 21 were allowed to list their student loans as part of the income they used to qualify for credit cards.

The study noted that loans typically don’t make the list of qualifying income sources for credit cards, which include salary, wages, tips, bonuses, commissions, self-employment income, interest, dividends, child support, alimony, retirement benefits and public assistance.

It’s important for teens and young adults in New Jersey to realize that using one form of debt to qualify for another form of debt can be detrimental to their financial futures. Eventually, both debts will need to be paid off, which means real income needs to be earned to repay the loans and credit cards to avoid creating future credit problems that will take years to repair.

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