CARD Act result: Fewer college students opening credit cards
At my college orientation, the campus was full of brightly colored tents where students could receive free T-shirts or pizza in exchange for applying for a credit card.
Those tents are gone now, thanks to the Credit CARD Act, which put a halt on aggressive marketing tactics featuring free merchandise on college campuses.
The CARD Act also limited students’ access to credit. Without a cosigner, a student can only have access to the greater of a $500 credit line or 20% of his or her annual income. All credit lines combined must amount to no more than 30% of the student’s annual income.
As a result of such measures, new credit card accounts among college students are on the decline: They dropped by 17% between 2009, when the act went into effect, and 2010.
Nonetheless, credit cards aimed at students haven’t gone away. While the cards may have lower credit lines than they once did, it’s still not difficult to be approved.
Some of the available card options offer enticing benefits to students: Citi’s Dividend Platinum Select credit card offers 5% back on supermarket, drugstore, gas station and utility expenditures for the first six months and 1% after that.
However, if your college-age child is considering getting a credit card, take the time to talk about the importance of prompt payments, as credit card debt during your child’s college career can scar his or her credit score for years to come.
The CARD Act offers some protections for consumers, but teaching your children about financial literacy is the best protection of all.