Easy access to student credit card offers has led to an escalating amount of debt among teens. However, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD) introduced new laws that will make it harder for students to qualify for credit cards. These new laws aim to reduce student credit card debt.
About 84% of college students have credit cards. In fact, recent studies indicate that students have an average of 4.6 cards each and graduate with a debt of $4,000 or more. Credit companies prey on teens and young adults, taking advantage of their lack of knowledge and enticing them with offers of “freebies” such as clothing, food, and electronics.
To college students, credit cards can seem like the perfect answer to achieving independence, and lending companies gear their marketing tactics to appeal to this desire.
Unfortunately, many students fail to read the fine print in their agreement and have not been taught how to handle credit responsibly. As a result, they soon find themselves juggling several different cards at the same time and struggling under the stress of debt that they are unable to pay. This unpaid debt can destroy their credit rating and make it difficult for them to purchase homes or vehicles once they graduate.
College life can throw a lot of twists and turns at you. During my freshman year at the University of Iowa in 1996, one of those twists came at the expense of the Citibank “Student Advantage” Mastercard.
As I was walking into our Student Union, I noticed a bunch of tables side by side talking to students as they walked by. Interested … and broke … I stopped to look at a brochure, and the credit marketer told me they had a great card for me at a GREAT 24.99% Interest Rate.
He quickly moved on from the interest rate to talk about how I could immediately spend to get what I needed and since I was from Virginia, it would save my parents a lot of money wiring and sending packages.
It sounded like a great deal to me, so I signed up. Little did I know that not only did I get in trouble with my parents for making that decision without consulting them – here we are nearing 20 years later, and that card is still being paid. Lesson learned.
Now, as an adult, of course I know that rate was horrible, but this is how student credit card offers used to feed off college kids and put them into debt before they even know what is happening.
I am glad to see that credit companies are not as aggressive as they used to be, however I am sure they will find some other way to lure in naive students who initially have visions of $$ signs, but only debt to show for it later in life.
Posted by: Ann Marie
While students like the idea of available credit, many find themselves in trouble because they do not know anything about credit cards and the impact they can have on their credit score. Students need to be educated about interest rates, responsible spending, and the consequences of misuse. However, until recently, it was possible for a teen as young as 18 to obtain a credit card without the parents knowledge and with no proof of income. A continuing increase in the number of students graduating with significant debt has led to major changes in credit card laws.
As of February, 2010, new laws outlined in the Credit Card Accountability, Responsibility and Disclosure Act now apply. While CARD was designed to encourage responsible borrowing at every level and age group, a large section focuses on teens and credit cards. In an attempt to lower the number of college-aged cardholders, this law highlights changes in approval requirements, credit limits, and marketing strategies, and also introduces new guidelines that ban credit card companies from college/university campuses.
New laws for student credit card offers may help protect credit ratings and allow students to graduate without the burden of large unpaid debts. Today more students will have to turn to a secured student credit card or wait until they graduate.
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