New Credit Card Bill Hits College Students

By Michael Killian, CardRatings.com Reporter

Editor's Note: This article is an interview with Jim Randel, a nationally noted personal finance expert and author of the The Skinny On book series.

College and university students wanting credit cards will soon encounter new legislation making it more difficult for them to get a card as well as more difficult for credit card issuers to market to students.

Jim Randel, a nationally noted personal finance expert and author of the The Skinny On book series, offered his input on this upcoming legislation.

Mike: Jim, there is new credit card law that has just been signed by the president. Can you elaborate on this new legislation as it applies to college students?

Jim: Sure. The new law is called The Credit Card Accountability Responsibility and Disclosure Act of 2009 (sometimes referred to as The Credit Cardholders Bill of Rights). President Obama signed this law on May 22, 2009. It becomes effective February 22, 2010. The law has major significance for college students.

In particular, the new law says, in part: "No credit card may be issued to, or open end consumer credit plan established by or on behalf of, a consumer who has not attained the age of 21, unless the consumer has submitted a written application to the card issuer that meets the requirements of sub-paragraph (B).

"Subparagraph B. An application to open a credit card account by a
consumer who has not attained the age of 21 as of the date of submission of
the application shall require -
"(i) the signature of the parent, legal guardian, spouse, or any other
individual over the age of 21 having a means to repay debts incurred by the
consumer;
"(ii) submission by the consumer of financial information indicating
an independent means of repaying any obligation arising from the proposed
extension of credit; or
"(iii) completion of a financial literacy or financial education
course designed for young consumers."

In other words, starting Feb 22, 2010, it is going to be much harder to get a student credit card.

Mike: Do you support this portion of the new legislation as written? Why or why not?

Jim: I do not support this law as written. I think that if an 18 year old can serve in the military, can drive, and can vote, it is ridiculous to assume that an 18, 19, or 20 year old is not capable of handling debt. The key in my mind is to educate our young adults so that they learn the pros and cons of debt and credit. To keep credit from them as a matter of law makes no sense to me.

Mike: According to Curtis Arnold, the founder of CardRatings.com and author of How You Can Profit From Credit Cards, the impact of the new law on students could be huge and will likely have some unintended negative consequences. Curtis maintains that much more emphasis should have been placed on the need for credit education among students. He is a big fan of mandating personal finance classes for all colleges in the country (an important component that is missing from the law). Any comment?

Jim: I totally agree with Curtis' statement. However, not everyone agrees with us. If you go to The Huffington Post you will see a post I put up Monday of last week entitled 5 Reasons to Push Your Kids to Get a Credit Card. Most of the commentators thought my position was wrong.

Mike: With the new law going into effect in early 2010, will there by a potential tidal wave at fall college registrations to "sign up" for student credit cards?

Jim: As you probably know, the credit card issuers have been aggressive marketers on college campuses for several years. I doubt this fall will be any different than others. I am hopeful that people like Curtis (and to a lesser extent myself) are starting to bring an awareness of the positives and negatives of credit cards to young adults and that perhaps with each passing year they will become savvier about the risks as well as the rewards.

In closing, I think Curtis and Jim have hit the “nail on the head”. Legislators have let our college students down. Much more emphasis should have been put on financial education. You can regulate the card industry to death, but students lacking credit education are still likely to misuse plastic.

If you are a student and planning on getting a card, I strongly suggest comparison shopping for the best student credit card on CardRatings.com.

What do you think about The Credit Card Accountability Responsibility and Disclosure Act of 2009? Would love to see your comments and questions on our active credit card forum.

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This article was written by Mike Killian, Founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Student Credit Card Debt Rising at an Alarming Rate According to Study

By Michael Killian, CardRatings.com Reporter

Editor's Note: This article is an interview with Dr. Mary Ann Campbell, CFP, an instructor of Personal and Family Finance in the Family and Consumer Sciences Department of the University of Central Arkansas.

A recent national study by Sallie Mae, the nation's leading provider of student loans and administrator of college savings plans, found a rising number of college students using credit cards for tuition. The findings suggest average student credit card debt for direct undergraduate education expenses is $2,200. The study also found that 30% of students put tuition expenses on their credit card, an increase from 24% cited in the last study in 2004. Finally, the study showed that 92% of undergraduate credit card debt included textbooks, school supplies, or other direct education expenses, up from 85% in the previous study.

Dr. Mary Ann Campbell, CFP, is an instructor of Personal and Family Finance in the Family and Consumer Sciences Department of the University of Central Arkansas. Dr. Campbell has a personal Web site at Money Magic. She offered her insight to these student credit card findings.

Mike: One response to the Sallie Mae report suggests that using a credit card is wise because you can earn rewards from a credit card. Any comment?

Mary Ann:Very few of my college students have the credit card wisdom, use experience, or role models to be savvy regarding "reward cards." They are excited to learn about reward cards in class or from Curtis Arnold's book, How You Can Profit From Credit Cards because not many learn about reward cards at home. In fact, they cite they are told to have no credit cards at all because of parents' negative experiences, or they see parents under stress due to credit card debt.

Mike: In 2001, a CBS expose suggested 10% of college students owe $7,000 or more in credit card debt. The Sallie Mae study suggests this trend has now increased. What are your feelings on this issue and should we be doing anything about it?

Mary Ann: I find it increasingly alarming to see the amount of credit card debt many of the college students in my classes are carrying. I see individuals, single mothers, and couples carrying impossible amounts of debt. They retrieve their credit reports from www.annualcreditreport.com and share with me charge offs, late payments, and other major blemishes on their young reports.

On the other hand, I have many students who have no credit, or have a reasonable amount and are not only using it wisely, but are actually saving money while they are in college. I don't quantify them, but perhaps I should to track the trend in a more factual manner.

Mike: How can we improve this situation and is federal legislation needed?

Mary Ann: To me, the most important improvement needed is to immediately cut the exorbitant credit card interest rates now, not in July of 2010. Yes, legislation is needed to halt universal default. The banking industry lobbyists have definitely out muscled the consumer lobbyists. People who are working to pay off their credit cards deserve more fairness as they work to do so.

Mike: Do you have any other comments you would like to add?

Mary Ann: Yes, effective money education has big pay offs for individuals, families, businesses, and our communities and nation as a whole. We need to increase and strengthen a level playing field in the credit card arena coupled with early money education beginning in junior high school.

I personally find this report alarming and am thankful for Dr. Campbell’s insights. When I conducted this interview, Congresswoman Maloney's landmark Credit Cardholders' Bill of Rights had not been voted on by the U.S. House. This legislation, which passed the House today and will be voted on by the Senate soon, may help reverse the negative trend discussed in this article. Among other things, the bill would limit the credit lines of college students without a co-signer, require creditors to obtain proof of income before issuing a student credit card, and require parents to agree in writing to credit line increases on card accounts that they are co-signers on.

Change is happening folks and I for one am optimistic that we are at a turning point. Our students deserve a better future and I think they just might get some assistance soon.

What do you think about student credit cards and student debt in general? Would love to see your comments and questions on our active credit card forum.

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This article was written by Mike Killian, Founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

---

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!