Growing up, most of us have seen our parents deal with credit cards. We have seen fashion queens in movies brag about how many cards fill up their Gucci wallets.
For college students and teenagers, credit cards surround us. As soon as we hit their freshman year of college, credit cards are being sent to our P.O boxes and banks are at every school function, handing out free T-shirts and credit card pamphlets, and more and more students are falling into the fiscal hole.
Joining these banks, Forever 21, one of the most popular fast fashion chains has released their “Forever Rewarded” credit card. This may be a great way for teens to get rewards on their knock off blogger style, but the credit card is dangerous for Forever 21’s pre-teen and teenage demographic.
Forever 21 is not the only store to participate in the credit card craze, but it is one of the only stores that is pushing the increasing debt among teenagers and young adults.
When walking into the store, there are bright yellow signs promoting their rewards program and hinting at a credit card in fine print at the bottom. You can pick up a pamphlet at the check out counter and the cashier will ask if you would like to participate in the “Forever Rewarded” card or Forever21 card or even “The Card.” The cashiers and the advertisements skirt around the words credit card and dazzle their young buyers with discounts and free stuff on their birthday.
Once you are approved for the card here are some of the rewards for getting the Forever 21 credit card: For every $100 on Forever 21 purchases you will receive 300 points, on every $50 on qualifying restaurants you will receive 100 points and for every $200 on monthly bills (for visa Forever 21 credit cards only) you will receive 200 points. After spending $350 you will get 600 points, which will get you a whole $10 Rewards Certificate to redeem at Forever 21. Talk about forever rewarded.
Here are a few other rewards, you will receive 15 percent off your first purchase which expires on the date of application and is subject to credit approval, you will also receive a $10 discount the first 90 days, if you use the card outside of Forever 21, and for your birthday, you won’t get a free Frappuccino, but a $5 discount on accessories only if your account is in good standing and active within the last twelve months.
In order to stay in good standing with these cards you must of course, pay your bills on time or be charged with 27.24% interest. The national APR average for credit cards is 15.07%.
The President of Forever 21, Alex Ok, discussed the new credit card in an interview with WWD. “As we continue the rapid pace of our growth we’re confident this new credit and loyalty program will be a key driver of incremental and top-line sales, as well as further strengthening the relationship with our customers.”
Melisa Miller, the president of Alliance Data’s card services business and new partner to Forever 21, also commented about the increase in sales and information on their customers. “Working collaboratively, we will drive greater brand loyalty and increase sales through a credit program that extends the reach of the brand and offers the features and benefits that appeal to its fashion-forward customers.”
These credit cards may create a bond between the stores and the customers through bills and discounts, but it also creates risky habits for young adults who are not yet fiscally mature and are already bombarded by credit card companies.
In 2009, Sallie Mae reported that 92 percent of undergraduates charged direct costs for education like tuition and textbooks. In the report, Mae shows 20 percent of seniors have greater than $7,000 in credit card balances. These same seniors also pay close to $30,000 in educational loans, and books. On average, college students are over $30,000 in debt by the time they graduate.
David Laibson of Harvard released a study showing that new credit card users pay most of the late fees etc., rather than seasoned cardholders. These first time credit card users are mostly young adults or college students.
“Late fees will be tacked on, and of course it will show up on your credit score,” Forbes commented on the ugly side of students with credit cards in “Student Credit Cards: The Good, The Bad, The Ugly.” They went onto say that because most students don’t have a steady income these late fees, will make it harder “when you leave school to get the car loan, mortgage or additional credit cards you may want.”
Although credit cards are a good way to build up credit history in order to rent an apartment, buy a car or a house, teens and students do not have a steady income to keep track of credit cards.
Young adults also have a harder time making rational decisions because the frontal lobe, the rational thinking part of the brain, isn’t developed until age 25. This lack of rational thinking in teens and college students could lead to a trail of bad fiscal habits and debt when allowed an easy way to apply for a credit card. And Forever 21 has done just that.
Fast fashion is all about buying knock off runway looks for less, throwing them out a month later, just to be back at the store with a yellow bag full of clothes. Forever 21’s credit card is dangerous for their teen fast fashion lovers that live for the shop, throw out, shop, and never wear again mentality.
Forever 21’s largest issue in promoting the lifestyle of debt with credit card usage is due to their advertising. “Forever Rewarded” credit card is advertised as a rewards credit card. The fast fashion chain is aware that no one, especially young adults like to read fine print.
So when a leading company in the fast fashion world endorses the rewards program and leaves the credit card detail in fine print, this confuses their shoppers into getting just another card that will give them coupons, and free stuff on their birthday.
Forever 21’s tempting “Forever Reward” credit card promotes the risky credit card lifestyle for their young demographic insuring them to be lead into bad fiscal habits and debt.