A new law that will change the way college students get credit cards went into effect this week.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act is designed to protect consumers from deceptive tricks credit card companies pull to get more money from cardholders.
Most importantly for many USF students, consumers under the age of 21 can no longer be issued a credit card unless they have a co-signer or can prove they are financially able to repay debt.
Congress made the right decision by passing this law. Students can still get credit cards, but new regulations will ensure they know what they are getting into.
College students are often seen as easy targets for credit card companies, which set up shop on campuses to offer incentives like free food and gifts and hand out credit cards to applicants, knowing nothing about their incomes.
But the CARD Act won’t allow that. Companies can no longer give out freebies on or near campuses or at university-related events.
Universities often make deals with credit card companies and give them student contact information. This practice will continue, but institutions must now make such deals public.
In 2008, 84 percent of undergraduates had at least one credit card, and the average balance was more than $3,100, according to The Associated Press. That means rather than paying off their purchases, students allowed thousands of dollars in debt to carry over from month to month.
Students are relying too heavily on credit cards, and many are using them to pay for tuition, books, commutes and housing, according to a 2009 survey by Sallie Mae.
Many hope these new barriers will combat student debt.
“I think it’s going to keep a lot of students from getting into trouble,” Irene Leech, associate professor in consumer studies at Virginia Tech University, said to CNNMoney.com. “I hope it means we’ll have more responsible lending and parents don’t get surprised that a young person has taken out this debt.”
Some argue that restricting student access to credit will hurt them later in life. One of the best ways to build a good credit score is to responsibly use a credit card.
“We still live in a credit-dominated society, and even if a person chooses to live on a cash basis, most of us are going to need credit when it comes time to buy a house or a car,” Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, said to USA Today. “This means having a thick credit file and a high credit score, which can only be accomplished by having some degree of credit and treating it responsibly.”
However, students do not decide to build a good credit score on a whim in exchange for a free T-shirt. If students think that far ahead, they should be willing to take the now-required extra steps to get a card.
If students under 21 have parents co-sign, they will have an added layer of accountability to manage their credit responsibly.
Credit card companies must finally learn that taking advantage of their customers is no longer an acceptable business model.