Everybody recognizes Discover as one of the more acknowledged trademarks in the financial services, as well as being one of the leading card issuers of the U.S. This past month, Discover announced their “Good Grades Reward Program” for students who sign up for their new student credit card. Students who sign up for this particular card will be rewarded with a $20 cash-back bonus for maintaining a minimum of a 3.0 GPA for the first five years of creating their account.
A Marketing Scheme?
As a marketing move, this proves to be quite clever, as it provides students some incentive to get better grades for a small reward. Along with this cash-back incentive, students can also receive other cardholder incentives:
- Up to 5% cash-back in categories that change quarterly
- 1% cash back on other purchases
Students who continue to use the card can also receive their FICO scores at no cost along with the capability to see what impacts their scores. Students can also “freeze it,” which can be utilized as a mobile app to stop the use of their cards in a matter of seconds. This could be a good way to prevent students’ use of their cards.
A Devastation in Disguise?
On the flip side, it can prove to be destructive for students who are not prepared to be in charge of such responsibility. I remember how easy it was to get a credit card in my college years; card companies would be camped out on campus providing students with free t-shirts and other giveaways simply for signing up for a card. The fact that this is now illegal says enough. Many students make the mistake of falling into this trap; we’ve all experienced some form of debt possibly from our college years as a poor college student.
Does this Violate the CARD Act of 2009?
The CARD Act of 2009 explicitly prohibits credit card issues to promote their products via free giveaways to lure students into card agreements. While this certainly isn’t the case, it does seem borderline.
The whole purpose of this card is to reward good grades, but is the $20 reward just a mechanism to lure hungry broke college students to sign up for their credit card?
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How about more emphasis on financial education…
There seems to be a void in educating college students about the importance of maintaining good credit. A better solution to this is to reward students for maintaining their credit score year over year. This achieves several things: encourages students to pay their bills on time as well as Discover ensuring that they receive their monthly payments.
By doing this, Discover can set themselves up to be a key differentiator by putting a greater emphasis on financial education. Not only can they be the “white knight” in the industry, but they’ll have a lifelong customer.
As a wide-eyed young college kid, I had no idea how much of an impact credit card debt could potentially have on my credit. It was years later that my parents took on this debt and my slate was wiped clean. When you get that first card, spending is too easy. Is a $20 cash-back bonus plus incentives going to make students spend responsibly? Students have to realize that even with all these incentives, they are still spending what they don’t have. That is essentially what a credit card is.
With that being said, is this program actually a benefit to students, or is this another clever ploy to prey on innocent students who may not even be able to hold down a part time job?
You make the call.