In just under a month (Feb.22.2010) the new credit card act goes into affect.
A few readers have emailed me to ask about this.
What does this new credit card act mean to me?
What’s going to happen to student credit cards?
Will it to be tougher to get a student credit card?
These have been common questions and it’s time to answer them.
Is it tougher to get a student credit card?
Well if you’re below 21 than the credit card act means a lot for you. And yes it will be tougher to get a credit card.
It’s going to be tougher to get a credit card if you have no evidence of income or a co-signor with good credit. Prior to the new credit card act, credit card companies were throwing credit cards at college students the same way we throw everything around when we get home after a night of drinking. You could go to class on the first day and come home with a shiny new credit card and a brand new frisbee. Not anymore.
The thing is this- if you have no income you shouldn’t really be spending money. But that’s none of my business because we all live different lives. Let’s move on…
The new credit card act really sucks if…
You’re an entrepreneur. As a young entrepreneur it can be fairly difficult to prove your income/earning potential. Plus as an entrepreneur there’s a good chance that you want to build your credit for the future (mortgage, car, or even rent). Until you hit the age of 21 you’re either going to need a co-signor or some how have to prove you have money coming in.
Your parents have bad credit. If your parents have bad credit then they won’t be able to co-sign for you. If you have difficulty proving you have a steady income and your parents have less than stellar credit, you’re going to have to wait until you’re 21 to both drink booze and hold a credit card.
Waiting until you turn 21 to get a credit card can be a blessing in disguise for some. For others it will only delay the credit building process. Whatever you do, do NOT ever use a credit card generator to make those online purchases.
Consequences of the credit card act for parents…
So say your child messes up with their new credit card and the debt adds up. Not your problem, right? Well not anymore. You co-signed!
If your child doesn’t make their monthly payments, defaults, or runs into the risk of completely destroying their credit, you may have to help out. I know this sucks but financial education now becomes even more important.
On the bright side, you now have more control of your kids financial situation. You won’t be surprised to find out that your (18-21 year old) came home from school with 3 different credit cards.
What do you guys think of this new credit card act? Good idea or horrible idea?
Details: The new Credit Card Accountability, Responsibility, and Disclosure Act was signed by the President of the United States in May of 2009. It goes into effect on February 22, 2010.
Check out Gen X Finance for more on what the new credit card law means for teens.
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So… I guess students will just have to save money for a few weeks to buy something. They may not like it at first but they will be very thankful later.
As for the credit CARD act, great idea.
Oh yea. Student credit card spending will definitely go down.
How do you think this impacts those that want to build their credit at a young age?
I think it depends on who you ask. If you ask the bank, of course, they’ll say its bad because they have less “market” to work with and it will hurt their revenue. If you ask the proponents of this act, they’ll say its a good thing because they hope people will be better prepared to deal with debts (credit card in particular) when they reach 21.
If you ask me, I’ll say it doesn’t matter. I am comfortable paying with cash.
If you ask me I don’t care because I have a credit card and am older than 21.
I deal with finances, more specifically credit cards. Many days in conversation with people I help think Obama is going to save them and the “NEW CREDIT CARD REFORM” will put the bank in place stop the fees and raising the rates,and and in some sense they have when it goes into effect. It seems more like slowing them down in how fast they can raise it. I was appalled when I came across the fact First Premier Bank Card has an interest rate at 79% !!!! Are you kidding me people? The crazy thing is that it is legal. First Premier is just following the new regulations found in the Credit Card Reform Bill passed by Congress.
Thanks for stopping by Johnny. I deleted all of your links from your comment because I don’t know who you are. Please join the discussions first and then worry about links later.
I think it’s a joke. Either you’re an adult at 18 or you’re not. Proving you have an income should be the same whether you’re 18 or 40.
I know most finance discussions don’t typically mention this, but as bad as credit card debt is, it can certainly help some people. And it can be paid off…eventually.
I’m sure tons of businesses have been built using credit cards. If I recall correctly, the guys at Google financed their first servers and office with credit cards.
Turning 18 doesn’t change a person whatsoever, its a rather arbitrary number. Surveys have shown that college student’s are clearly in a worse financial state due to companies pushing credit cards on them. The fact that they are marketed to so heavily goes to show that credit card companies find that demographic highly profitable. And profit for a credit card issuer necessitates a loss for credit card holders.
Do the math behind interest rates in the range that credit cards will give you and you will see it helps no one.
That’s exactly my point. ANY number is going to be arbitrary. But that’s why we need one number. Either you’re an adult at 18 and can do everything and I mean everything or you aren’t an adult until you’re 21… for everything.
At 18, you have to realize that you are in fact an adult and the decisions you make carry more weight than they might have before.