Credit cards can be a risky option for college students to handle their finances; nonetheless, it is a highly utilized option.
Fifty-five percent of college students get their first credit card during their first year of college, and 83 percent of college students have at least one credit card. The average undergraduate has $1,843 in credit card debt, according to the statistics page of the Credit Abuse Resistance Education (CARE) Program website. Many credit card companies attach 15 to 20 percent interest rates to these high-risk college cards.
Since many students have some sort of debt due to credit cards, a law passed last year is working to protect college students from the risks associated with credit cards, such as the possibility of graduating from college with a high amount of debt.
The Credit Card Accountability, Responsibility and Disclosure Act (aka Credit CARD Act) of 2009 defines how credit cards are to be marketed, advertised and managed. The law is aimed to protect consumers by banning unfair rate increases, preventing unfair fee traps and protect students and young people, according to a White House press release.
Under the new law, students younger than 21 and not working a full-time job must have their parents or guardian co-sign a credit card application, according to an article on the CreditLoan.com blog. Credit card companies that may have previously advertised on campuses, luring in unaware students with free T-shirts, are blocked from college campuses under the new Credit CARD Act. In addition, credit card companies are no longer able to enter into promotional deals with colleges and universities unless they advertise that deal.
“Previously, credit card companies frequently gave a percentage of its earnings to the college or university in exchange for it allowing its logo to be used by the credit card company,” according to CreditLoan.com.
Credit card applications are notorious for jargon and empty language that is difficult for the average American to understand. The 2009 Credit Card Act aims to regulate credit card companies and stop them from using this kind of language and make their applications easier to read. Experts say that it is too soon to know how well the law is working, but regardless of the law, consumers should educate themselves and know which credit card works for their budget.
Elizabeth Bickford, University director of financial aid and scholarships, believes that the key issue with credit cards is responsibility.
“Credit cards aren’t evil. It’s how you use them that matters,” she said.
In this modern age, it can be tough to get around without plastic. They are required for airline reservations, hotel rooms and building up a good credit rating.
“Before signing up for a credit card, students should look at the big picture,” Northwest Community Credit Union social media director Thea Albright said.
Debt can be avoided if credit card owners are responsible.
“Learn how to budget and manage it, and be able to pay it off on a monthly basis,” she said.
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