College students all across the nation are getting ready to head off to school, and start a new semester. However, students who are under the age of 21 might not be leaving home with a credit card in hand. This could be a good thing, or a big inconvenience, depending on your point of view. This is one of the effects of the CARD Act.
The CARD Act is the Credit Card Accountability, Responsibility, and Disclosure Act, which was signed in 2009. This Act provided a series of protections for consumers, and prevented credit card companies from continuing to do many of the questionable practices that they were doing before the CARD Act existed.
Some of these protections specifically involve the way credit card companies are allowed to interact with young adults who are under the age of 21. In the past, it was common for credit card companies to set up a table near the college bookstore, or in the center of campus, in the hopes of attracting the college students who were bound to walk by. Many credit card companies would offer a free item to entice a college student, who may not know much about credit, interest rates, or annual fees, into applying for their credit card. Free hats or free water bottles are hard to turn down if you are a college student who needs one, and has run out of money. Free pizza can be impossible to turn down if you are a starving college student! Many people felt that these practices were unfairly taking advantage of young college students.
Now, people who are under the age of 21 are required to have a cosigner in order to be approved for a credit card. Often, the cosigner will be one of the young adult’s parents. Credit card companies are no longer allowed to send unsolicited credit card applications to people who are younger than age 21. And, they must let the cosigner know before they try and raise the credit limit on a credit card, which might help prevent a young person from accruing a large amount of credit card debt. These protections also prevent credit card companies from standing on campuses and promising free pizza.
On the other hand, these new regulations also create difficulties. People who are over age 18 but younger than age 21 are, legally, adults. Yet, they are not allowed to have a credit card without a cosigner. Young adults whose parents are unwilling, or unable, to be their cosigner cannot get a credit card. This can be especially trying for young adults who have gotten married, and started a family of their own.
Image by Ivan Walsh on Flickr