Understanding credit card payment behavior among college students

Abstract

College students remain a lucrative target market for credit card companies even after the advent of the Credit Card Act of 2009. Unfortunately, many students are not prepared to use credit responsibly or make payments in a timely manner. Numerous studies reveal risky student credit behaviors, lack of credit knowledge or irresponsible management of credit. However, there remains a need for more information on college students’ payment behaviors. This paper aims to explain credit card payment behavior among college students by segmenting college students into payment behavior groupings. Using an online survey, students provided their credit card payment activity and demographic characteristics. The results of this study shed light on different credit card payment behaviors by segmenting college students into four behavioral segments based on useful characteristics. Clear distinctions exist between segments who behave in responsible ways versus those who do not practice responsible behaviors. These segmentation results add to the understanding of Lyons (2004; Journal of Consumer Affairs 38 (1): 56–80) who determined a means of identifying Financially at Risk students (FAR) with payment behavior. Given potentially dangerous effects of targeted credit card marketing to college students, findings about payment behavior of college students will help policymakers, credit card companies and college administrators.