The CARD Act of 2009 set explicit restrictions on the card issuance for college students. From my experience with adult children in college, the change disrupted the process of pizza and beer placed on credit cards that parents had to resolve once delinquency or over credit limit statements hit the household address during intercession.
The downside of limiting college students is that their credit files were not as productive as their predecessors. With a plethora of student loan debt and no credit card history, graduates often had thin data or experiences limited by mounds of student loans.
PaymentSource talks about a new offering by Sallie Mae, which might change how many look at the student market. There is a logical flow between their three credit card offerings, called Ignite, Accelerate, and Evolve.
It is interesting to note that Sallie Mae’s Chairman and CEO, Raymond Quinlan, has deep experience in credit cards, dating back to Citi where he launched Citi Direct, a full-service internet bank. He is certainly not a novice to credit cards.
The three-card approach segments the market for Sallie Mae and its prospective student credit card application pool. Ignite is the base card, intended for students and pays 1% cashback; there is a 25% cashback bonus after six consecutive on-time payments. Accelerate provides a reward of 1.25% plus a bonus directed towards a student loan. Evolve provides purchase category bonuses, which change monthly.
Sallie Mae issues the cards through their Utah-based bank as their site indicates: “This credit card program is issued and administered by Sallie Mae Bank. Any account opened in response to this application shall be governed by the laws of the State of Utah.”
Bankrate is less enthused about Sallie Mae’s card offering where an analyst suggests two options:
- Apple Card or Petal Visa® Credit Card for current students or recent grads looking to learn cashback rewards. Both are fee-friendly, meaning no annual fees, late fees, or foreign transaction fees, and ultimately offer higher rewards potential.
With Sallie Mae’s ballast of more than 13 billion in assets, the publicly-traded company has the potential to attack the segment. In the U.S., 20 million attend a public or private university, many of whom already have a relationship with Sallie Mae.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group