College students will find it more difficult to get a credit card once President Obama’s new card legislation, the 
Credit Card Accountability, Responsibility, and Disclosure Act goes into effect on February 22, 2010. Among other accountability measures, the new policy calls for stricter approval policies for card applicants under 21. Students will need a co-signer who would also be liable for late or non-payments and proof of income in order to apply for a card.
In the past, young consumers were easy targets for credit card companies. College students would barely arrive on campus for freshman orientation before the card applications would start arriving by the dozen. Companies were playing on students’ relative inexperience with credit and offering attractive incentives for filling out an application. Living off plastic was great at first—until the bills started coming in, complete with those late fees. Soon, the unemployed student was getting a crash course in the reality of adult personal finance.
Welcome to the Real World, Son
The new policies will force students and their parents to have some important discussions about spending habits, budgeting, and why it’s important to make payments on time and avoid late fees. Many college students who are unable to make their monthly payments fall into a vicious cycle of high interest rates, balances due, and, in many cases, damaged credit reports that can follow them for years and make it difficult to rent an apartment or buy a car. It’s an easy way to get into some real trouble once you leave the safety of college.
On the other hand, some financial experts argue that the new policies might be giving parents a little too much power. Being a co-signer basically entitles parents to check up on their child to make sure their payments are being made and that their finances are in order. For some students, having parents as a co-signer might look like an easy way out of making payments, since the parents would also be responsible. It would be easy to think “Mom and Dad will bail me out if I get in trouble, so I can run up a huge bill.”
Other Changes
The CARD Act also includes changes to these companies’ marketing practices and stricter accountability for colleges and universities, including:
- Better disclosure about affiliations. Colleges and universities will need to be more up-front about any marketing or promotional efforts they hold as part of a partnership agreements they may have with credit card companies. Schools receive a certain percentage of major credit cards they issue with the school logo or mascot printed on them, and they will be required to report how much money they actually make from these cards.
- Fewer prescreened offers. The Act prevents the release of students’ credit card records to the card companies, which will drastically reduce the number of “preapproved” applications students will receive.
- So long freebies. Giveaways like T-shirts, electronic gadgets, or other enticing free stuff will soon be a thing of the past, as companies will no longer be allowed to use incentives to get students to fill out card applications.
- Encourage stricter marketing policies. Colleges and universities are encouraged to come up with their own marketing plans for these companies, which can include restricting the number of visits each year or only allowing them to set up in certain locations. The law also encourages higher education institutions to make financial wellness sessions part of their freshman orientation agenda each year.
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