Credit Card Law protects student from debt

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By the time 24-year-old Memphian Tyler Curry Graduated From Rhodes College in 2007 he had racked up over $4,000 in credit card debt. Curry, the Business Administration graduate, still suffers from the realities of compiling debt as he now searches for a job in accountancy.
“Things are tough right now, but I intend fulfill all my financial obligations before I try to start my own family”, Curry said.
As Curry struggles to pay off his accumulated debt, a new aim to prevent young people from running up debt even before they establish themselves in a career. The Credit Card Accountability, Responsibility and Disclosure Act last May went into effect almost a year ago, and its effects are already being seen.
No Longer will it be as easy for college students to fall into a world of debt. The Credit Card Accountability, Responsibility and Disclosure Act was signed by President Obama on May 21, 2009 and put into effect a day later on May 22.
The law states that no one under 21 can be issued a credit card with out a co-signer or proof of the financial means to repay. The law requires that all fees for subprime cards, whose total fixed fees over a year exceed 25 percent of the credit limit be paid up front before the card is issued according to govtrack.us.
In the past, credit card representatives would greet new and returning college students with a smile and offer gifts such as stuffed bears, tee-shirts, backpacks etc. in exchange for your personal information on an application, but this is no longer an issue as the newly passed law prohibits these “inducements” to tempt students. Now for a bank to participate in college and university themed events they must provide proper reason to do so according to the credit card law
The law will however continue to allow student to apply online for credit cards but they must still meet new and tougher requirements, according to regulations of the Board of Governor at the Federal Reserve rules and Bank of New York.
“ I got two credit cards when I first got out of high school and maxed them out. Now I am paying the price. This new law is a blessing for these younger kids who have no understanding of interest rates and could possibly get themselves in my current financial situation.” said Jasmine Boyd, 25, of Olive Branch, Miss.
The average amount of credit card debt held by college graduates is $2700, which is a $300 increase from 2001. Seventy-eight percent of college students hold at least one credit card, 32 percent have at least four credit cards, and on average students hold at least three credit cards. Out of Graduate students, 95 percent of them hold at least one credit card according to student loan company NellieMae.org.
“ Credit is so essential in everyone’s lively hood. Your credit score affects you getting a car, a house, an apartment etc. Some employers even check you credit history to see how “responsible” you are. So I am for this new law because of the benefits it will have on our youth and their adult living stability,” said Floyd Fields Financial Advisor for Waddell and Reed Financial Services of Memphis.
Some states already however had some firm laws in place. In New York, all colleges must prohibit any on-campus marketing of credit cards to students. Texas allows such marketing in "designated areas," but requires credit cards that do market on campus to also provide financial literacy programs according to usatoday.com.
“ This law I believe will save a lot of college students from falling into a world of debt. I have two credit cards that I got prior to entering my freshman year and maxed them out in less than a year. Now that I am out school and trying to get a nice apartment and car it really is holding me back from getting the things I want,” said Christian Lee, 26, of Collierville.
Information from Georgetown University says college students are more likely than other demographic groups to pay off their balances. However, they are likely to rack up more fees, since college students are also more likely to be late with their payments or exceed their credit limits.
“ You see the thing is most college students already accumulate thousands of dollars in student loan debt. So when credit cards are maxed and late fees and so forth start to mount, even college graduates can fall into a world of unpaid debt ” said Luke Lockett Financial Advisor of USAA. “I suggest getting financial advised by someone who knows how credit card interest rates work, be that a family member, friend, or associate before obtaining and using a credit card”.


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