Robert Brown has some ideas for how banks can help students learn to handle their credit cards without growing debt and paying interest. To deflect some obvious criticism, he concludes with “I honestly do feel that the big banks and other credit card providers are missing an opportunity to attract new customers – potentially very loyal customers for life – by treating them better while they are students. They will have plenty of time to profit from them once they have graduated.”
Let’s start with a minor problem. Brown thinks he knows how banks should run their business better than they do. This is ridiculous. If his simple ideas for encouraging students to avoid debt and interest were profitable, the banks would already be using them. The truth is that hooking students on credit cards is profitable on multiple levels. For one, students rarely default because their parents usually pay if necessary. For another, setting a pattern of high-interest debt makes people more profitable to banks later in life.
The bigger problem is the presumption that banks care at all what’s in their customers’ best interests. Many of us would like to believe we’re all in this world trying to help each other. But that’s just not true. What keeps any business in line is the threat of unhappy customers either leaving or demanding new laws to control the business’s behaviour.
Brown’s ideas might make some sense if he suggested creating new laws to force banks to help students. But the idea that banks would voluntarily turn away profits makes little sense.