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).
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
"(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.