Soon, college students will find it much tougher to get a new credit card. Later this month, a new law goes into effect that puts limits on how students can obtain new credit cards. Under the new law, those under 21 must have a parent or other adult cosign for the card if they do not make enough money to pay off any debt they may charge independently.
The Credit Card Accountability Responsibility and Disclosure Act of 2009, starting on February 22, 2010 is aimed at providing new protections for cardholders, including 45 days notice of any rate hike, and the requirement that all bills be sent 21 days before the due date. With change in the air, credit experts say it's a good time to form a new habit reading your statement closely. "It doesn't matter how big, bright, bold or better-positioned the now less-than-fine, more-easily-understandable print will be if you don't read it," says Adam Levin of credit. com.
The new law will also bring some big changes for college students. Consumers who are under age 21 must either have an adult cosigner, or have independent means of repaying the debt. Financial aid officers at UW-Eau Claire say the act is intended to protect students who may use a credit card to live beyond their means. "They've used that credit card to sometimes maintain a lifestyle that isn't in line with what they can afford to maintain as a student then we kind of have a combination of frank discussions with people," said Kathy Sahlhoff, director of Financial Aid.
A 2009 survey by student loan giant Sallie Mae, showed that 84 percent of college students have at least one credit card. Only 17 percent of those students said they paid their cards off each month. Even more troubling, the average student leaves college with over $4,000 of credit card debt. "Usually anything you can eat, wear or drink is not an emergency. And that's a good rule of thumb, not using your credit card for any of those kinds of purchases," commented Sahlhoff.
It's important to note, the rules regarding college students apply only to new credit cards, not existing ones. So college students who already have a credit card will not be affected, unless they sign up for a new credit card. (some say to apply before the 22nd while you can still get a credit card on your own with little hassle)
Based on the statistics above, I can see that a good handful of college students may have a hard time paying their credit card bills. Even though this regulation is intended to protect underaged adults, this regulation does not seem fair to some people that do a good job on keeping up on their bills. Some young adults need a credit card in a case of an emergency. What do you think about this new regulation overall? Will it protect us or put a burden on us? Would having difficult access to a credit card be a money saver?
I think the problem with young adults having credit cards is that they don't understand how to pay it back or what the consequences are if they don't. Because of the law requiring a co-signer, young adults may be forced to learn all the rules and regulations of having a credit card. My mom definitely did; she sat down with me and read all of the pamphlets and packets before I was allowed to have my card. E
ReplyDeleteI think that these are very smart measures to start teaching better money management skills to young adults. I feel like those in our generation have a very hard time learning to budget money, because we grew up in a society that taught us everything was obtainable with instant gratification. If we learn to pay now and not later then we will begin to see the reality of the purchases that we make. I for one try not to use my credit card that much, but then there is that balance of trying to accumulate good credit for later in life. It is very difficult to purchase a home or another large item without good credit. Personally I wish that our society did not use credit cards. I don't really see the point. You should be able to spend as much as you earn today, not as much as you anticipate in the future unless absolutely necessary. In my opinion these law changes are for the better of all.
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People are legally adults in the U.S. when they turn 18. After turning 18, they are legally responsible for their own actions. With this in mind, I think it's a bit too much to say that people will have to wait until they're 21 to be fully responsible for themselves credit-wise. Yes, younger people seem to make many more mistakes when it comes to using credit. However, this could be rectified by teaching the correct usage of credit in high school (possibly in economics class). Otherwise, they'll just have to learn from their mistakes. New regulations will hurt young adults who are responsible credit card owners, and will probably be a huge inconvenience.
ReplyDelete"Usually anything you can eat, wear or drink is not an emergency..." This line makes me laugh. It is so true that this line is the excuse used over and over, to pass off pointless purchases as 'OK'. Not that, I don't use it, but it's a comical happening.
ReplyDeleteMore seriously, I think that laws of this nature are a band-aid on a tumour, when what's really needed is surgery. Protecting cardholders may seem to help for a bit, and isn't an awful idea. Card suppliers should be forthcoming and honest about rates, and need to be held responsible for handing off cards to the "right people". But the solution lies in changing the conception that anyone can or should have a credit card, and in educating people about how to use their cards. This entails a bit more than what I've listed here, but the I think I've made my point.
I got a credit card last year and I hardly ever use it. I think that this new act is probably a good thing. I know a lot of people our age who have absolutely no money sense an could really benefit from the new regulations. Having a credit card shouldn't be such a big deal though, I suppose it depends on how a person is raised. 'Don't Spend Money you Don't HAve' doesn't really seem like that difficult of a concept, but evidently, for a lot of people our age, it is.
ReplyDeleteThe article says that people under 21 must have a parent or guardian co-sign "if they do not make enough money to pay off any debt they may charge independently". It seems logical to me that credit card companies would only give credit to people who clearly had a reliable source of income, be it their own personal salary or parental financial assistance. This seems like a way to protect consumers from being schemed out of their money through high interest rates and I think it should apply to all credit card applicants, not just people under twenty-one. If you can't afford to pay your bills now, there's little chance you can afford to pay them a few months down the line with a huge interest rate mark up.
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ReplyDeleteLet's see. Partly, I agree with the idea that if you're eighteen, you are an adult and should start acting like one. On the other hand, It is for eighteen year olds who don't have their own source of income. When I applied for my own credit card at the age of 19, I must admit that I was shocked at how easy I could get one, and how easily it would have been for me to get a card with a limit that vastly exceeds my income. I partly blame society's idea that credit cards are free money rather than short term loans. However, I do think that the credit card industry has done as much as it possibly can to encourage and perpetuate such a belief (ie stores that offer no interest for a year and deep discounts on the merchandise purchased with them), and to get as many cards in as many people's hands as possible, regardless of their economic reality.
ReplyDeleteI think that this new law will be more of a benefit than a hindrance to young adults. These responsible adults will help in more ways than one, esp. if they are your parents or someone who is responsible for the well-being of the young adult. They will serve as a pressure and a constant reminder that you need to limit your spending to only necessities.
ReplyDeleteI prefer to a use debit card because it helps me to spend only what I have and keep myself out of debts. I don't think that age 21 is quite reasonable because it gives young adults a chance to mature psychologically and should therefore be better able to make responsible decisions (what to buy or not). The statistics gives evidence that not because 18 is the legal age of an adult doesn't rule that they are responsible. Of the over 84% of college students who I assume are 18 and over, only 17% were consistent in their payments. E, A
I think there are both positive and negatives to this. I think they're good because it will help people stay out of credit card debt. However, I think they're bad because they do not promote independence or very much responsibility for these young adults. I also think that if you're 18,19, or 20 years old and are mostly living on your own in college, you should have enough self control to own a credit card without parental permission. And if you don't, then maybe you shouldn't have a credit card at all. A, E
ReplyDeleteI don't have a credit card, but I've recieved countless credit card offers in the mail. Every time I recieve one, my dad makes me read ALL the fine print. A hassle, yes, but at least I know what to expect whenever I do decide to get a credit card. I think that if someone who is 18, 19 or 20 undestands the repercussions of owning a credit card and is capable of using it responsibly the requirement of parental permission is overkill. However, for the vast majority who apparently do not know how to manage a credit card, a parental cosigner could be a way to avoid credit card debt. A,E
ReplyDeleteI agree with Hannah, in that I feel that as a nation, we have grown too attached to credit cards. I think that our over reliance on them is symptomatic of the spend now, worry about how to pay later, attitude, that is at least partially responsible for the recession we're in.
ReplyDeleteCurrently, I do not have a credit card because I live by the philosophy that I should only spend what I earn. While I understand that incentives come as a part of the credit card deal through rewards and points added to your credit, I still feel that there is no rush for me to obtain one.
ReplyDeleteI think credit card companies are making a wise decision by enforcing these new policies. While they may lose business of the young adult population, they are making it so that they are at better financial means as a company.
The nation has 2 trillion dollars in consumer debt. We need to start making economically smart decisions for our future, instead of trying to appease our current wants and desires. While I do agree that people need credit cards for emergency purposes, I still think that if you don't intend to pay it back, then what's the point of getting one in the first place. Racking up debt as a young adult is probably not the best thing to do. {E,A}
I think this is a good idea because it promotes learning how to handle your bills responsibly. I don't mind the part about the co-signer either because it means you are responsible to not only yourself, but also to another person. This promotes better usage just because of this pressure. Furthermore, I think credit card companies learned the hard way by issuing credit cards to anyone, because they now have people who can't afford to pay their debts. E, A
ReplyDeleteTo those who pay their bill every month, it shouldn’t bother them because they can still keep on doing the same and there will be no consequences for them. In the other hand, I think this new regulation is a very smart idea and a way to help college students/ young adults save up and prevent them from going into debt. The harder the credit card companies make it for young adults to get a card less people are going to be whiling to try to get one; this while also help the government be more aware of who is borrowing money and with this new law someone has to pay for the debt either the student or the cosigner. A.E
ReplyDeleteRather than a hindrance to young students, I agree with the commnets above that this is a smart decision. Some college kids don't have any sense of finance and hardly pay their debts. The new rule helps to regulate their behavior and prevents them from spending too much.
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