Even a brief, voluntary online financial-literacy lesson can have a significant positive effect on how college students use credit cards, including driving them to have higher average credit scores and fewer credit card late fees, new research suggests.
Wells Fargo & Co. in March announced the results of a study conducted with Visa Inc. that compared the account data of new college student credit cardholders who received an online financial-literacy lesson with those that received no such lesson.
In 2009, Wells began to mail to new college students it approved for a Visa credit card an offer for a free matinee movie ticket in exchange for participating in an online credit card-use education program. Wells directed each participant to a Visa website containing two lessons with accompanying quizzes to increase awareness of responsible borrowing and credit management.
Data Wells collected in September found striking differences between the behaviors of 3,564 new college credit cardholders who opened accounts in the first half of 2009 and completed the online lessons and the undisclosed number of new cardholders who did not.
Cardholders who completed the financial-literacy lessons boasted average increases in their FICO credit scores that were 240% higher than the increases for those who did not complete the lessons, the data show. Those who completed the lessons also were 51.2% less likely to file for bankruptcy protection than were those who did not complete the lessons.
Cardholders who completed the lessons also demonstrated a 45.1% improvement in their 60-day account-delinquency rate, and the percentage of cardholder accounts with late fees was 22.8% less than for those who did not complete the lessons.
The average revolving monthly credit card balance for cardholders who completed the lessons was 20% lower than for those who did not, although overall card use was higher among those who completed the lessons.
The results indicate that “educational intervention has a significant impact on (cardholder) behavior,” Wells Fargo noted in a press release. And financial-literacy efforts conveyed online are particularly effective in changing cardholder behavior, Wells noted.
Wells continues to extend similar direct-mail offers to new college students it approves for credit cards “as part of a rolling program,” a Visa spokesperson tells PaymentsSource.
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