By Steve Knight/editor-in-chief
Starting in February, students under 21 who wish to apply for a credit card must do more than simply signing the application.
The Credit Card Accountability Responsibility and Disclosure Act, signed by President Barack Obama May 22, will prohibit anyone under 21 from applying for a credit card without a co-signer, which includes a parent, legal guardian or spouse.
Under the new law, individuals under 21 showing financial means to make payments can still sign an agreement on their own.
In addition, the law requires colleges and universities to disclose any agreements they may have with credit card companies for marketing purposes, such as events on or near campus sponsored by the school.
TCC tries to limit solicitations and has no agreements with any credit card companies to market on campus, said Richard Inman, director of business services.
The legislation also requires credit card companies who wish to market on campus to notify the school.
The law, which takes effect Feb. 22, provides protection for individuals under 21 and limits on-campus solicitations.
A recent study by student loan lender Sallie Mae found that college students carry an average credit card balance of $3,173.
Todd Mark, vice president of education for Consumer Credit Counseling Service of Greater Dallas, said in a statement that most freshmen enter college without much financial knowledge.
“Students are forced to manage their finances on their own for the first time — whether it’s making money from mom and dad last or working a part-time job to cover their expenses,” he said. “And, unfortunately, many of these students end up in debt.”
NE student Zachariah Barton said he knows what it’s like to carry too much debt.
“I’ve gotten into that spot, and it took me three years to get back on track,” he said. “I was in my early 30s when I made wrong choices.”
A recent study by the Center for Economic and Entrepreneurial Literacy, a Washington non-profit finance education organization, showed that the new law could help many students stay out of debt.
The study said 64 percent of college students have one or more credit cards, and 42 percent of freshmen are dependent on credit cards.
Of the total respondents, 61 percent reported credit card debt with 25 percent reporting balances of $1,000 or more.
The study also showed many students are not knowledgeable about the basics of interest rates with 44 percent reporting they did not know the APR (annual percentage rate) of the card they used most.
James Bowers, managing director for the center, said in a statement that it is important that students learn basic economic principles.
“We need to give America’s youth the information to succeed financially. CEEL’s survey shows that a majority of these future leaders are already credit dependent, don’t understand the basics of borrowing and may not have the tools to manage their personal finances in the future,” he said.
“It is clear that we need to increase personal finance education at all ages so we have better informed employees, borrowers and voters.”
NE student Elliott Miller said applying an age limit on credit cards similar to the age limit to purchase alcohol would prevent students from making mistakes that would result in debt.
“It’s about time they had a law like this,” said the 24-year-old. “Debt is something that goes with you for the rest of your life, and I don’t think younger people realize that.”
For more information about personal finance and economics, go to the center’s Web site at www.econ4u.org.
