Credit Card Companies and Students: How the Game Has Changed
On May 22, President Obama signed into law the Credit CARD Act of 2009. This law enacted sweeping changes to the credit card industry—including some significant changes to the way credit card companies can interact with students.
While some protections went into effect as early as August 2009, most kicked in around February 2010—with the rest going into effect in August of the same year. Here’s an overview of the rules—and what they mean for college students going forward.
You probably won’t see them giving out gifts campus
In the past, credit card companies would crowd college campuses, setting up booths and drawing students with free T-shirts, Frisbees, and even iPod giveaways. That’s no longer the case. Credit card companies are no longer allowed to be within 1,000 feet of college campuses if they are offering gifts as an incentive to sign up. However, the rules state specifically only that companies cannot offer “tangible” gifts to sign people up for credit cards; under these rules, it’s still legal to offer intangible benefits such as coupons or statement credit. Some credit card companies are still offering incentives such as these to students.
Choosing student loan options is never easy. Avoid taking out a private student loan if you can pay for your college tuition by any other means.
Under the new law, you need a cosigner if you’re trying to get a credit card and you’re under 21 years of age. This is a huge change from the way credit card business was traditionally done. For some students, this could mean higher interest rates and worse lending terms as a result of their parents’ low credit ratings. But the cosigner need not be a parent or even a relative, and some students simply pay or persuade older friends to cosign for them.
Even if you’re over 21, you won’t be able to get a card as easily
In the wake of the housing crisis, credit card companies—as well as every other type of financial institution—have tightened their restrictions on who can and cannot get a loan. Students are no longer seen as good potential loanholders, especially those with no credit history of their own or significant education loans. To get a credit card these days, you may face stricter requirements regarding credit scores, and not every student is simply given one as a matter of course.
Credit card companies can still market to you
Despite the restrictions about gifts, credit card companies are still free to send you offers in the mail—and according to the US News and World Report, many students are still receiving offers this way. Credit card companies can also offer tangible as well as intangible incentives for students through online offers.
Slightly better treatment from credit card companies
The new laws eliminate some of the more egregious practices of credit card companies, so if you do manage to get a card as a student, you may be treated better than you would have been before. Some highlights to the bill include no retroactive interest rate increases on existing balances; more time to pay monthly bills; greater advance notice of fees and major terms; and the ability to opt out of certain account changes.
Credit card companies tend to prey on college students. They’re considered easy marks, likely to sign up for cards quickly in exchange for free gifts. Don’t let a credit card company rip you off. Hold only one card with a low monthly interest rate and a minimal amount of fees, use it only for emergencies, and always pay your balance off every month. If you’re careful with credit cards while you’re in college, you can build up a good credit score—without building up debt.
The Chronicle of Higher Education: Credit Card Companies Cut Back
Connecticut Consumer Watchdog: College Students Getting Credit Cards Despite New Rules
Connecticut Consumer Watchdog: College Students Again Targeted by Credit Cards
Public Radio International: College Students Skirt Rules to Get Credit Cards
US News Money: New Rules for Student Credit Cards
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