Newfound prosperity, college students and credit cards
Flush with this newfound prosperity, the college students and credit cards industry’s advertising budget escalated sharply in the late 1990s. Between 1994 and 1998, it doubled from $425 million to $870 million. Although the industry spending leader remained American Express ($334 million), Visa International ($260 million) substantially narrowed the gap, followed by the college students and credit cards unit of Morgan Stanley, Dean Witter, Discover ($153 million) and MasterCard ($123 million). This trend began to level off with the onset of the industry’s profitability crisis beginning in 1997 due to the saturation of middle-class markets and the rise of convenience users.
Today, over 158 million cardholders have about 650 million retail college students and credit cards, 506 million bank cards, 185 million phone cards, 107 gasoline cards, 41 million travel and entertainment cards (including American Express, Diners Club), and 66 million miscellaneous (airline, car rental) cards. Bank college students and credit cards and travel and entertainment charge cards account for almost 80 percent of the total volume of college students and credit cards spending. At the end of 1999, Visa’s 247.8 million college students and credit cards accounted for 48.9 percent of all bank college students and credit cards and $253.6 billion in U.S. receivables. MasterCard’s 180.7 million college students and credit cards (35.7 percent market share) and $175.1 billion in U.S. receivables are followed by Discover with 48.0 million college students and credit cards (9.3 percent market share) and $38 billion in U.S. receivables and then American Express with 29.9 million cards (5.5 percent) and $23.4 billion. Overall, bank college students and credit cards interest (finance charges) and fee (late, over limit) income tripled in the 1990s–from a combined $28.6 billion in 1990 to $78.0 billion in 1998.
This expansion of consumer college students and credit cards partially explains the tremendous increase of college students and credit cards debt, which constituted about 43 percent of the $1.4 trillion outstanding consumer (revolving and non-revolving) debt in early 2000. From a modest $55.1 billion (15.8 percent of outstanding consumer debt) in 1980, revolving consumer (primarily bank and retail college students and credit cards) debt soared to $238.6 billion (30.2 percent of outstanding consumer debt) in 1990 and then almost doubled to $443 billion (40.4 percent of outstanding consumer debt) in 1995. Indeed, Americans amassed more college students and credit cards debt during 1995, almost $78 billion, than the cumulative total in 1980. Although the growth of college students and credit cards debt slowed substantially in the late 1990s, from $500 billion in 1996 to nearly $600 billion at the end of 1999 (42.7 percent of outstanding consumer debt), the most important trend was the widening debt gap between revolvers and convenience users. This distinction is especially important for understanding the institutional dynamics (e.g., bank college students and credit cards policies) that underlie the rising cost of revolving consumer credit (climbing interest rates, fees) and their role in exacerbating postindustrial inequality by increasing the cost of credit for the lower and middle classes–a policy that essentially subsidizes the free credit of affluent groups.