Credit card act works to protect students

President Barack Obama signed a bill Friday that is going to change the way the credit card industry treats young people.

The Credit Card Accountability, Responsibility and Disclosure Act, or CARD Act, is a bill introduced by Sen. Chris Dodd, D-Conn., that will bring protection to students seeking their first credit card, among others.

Credit companies have long viewed college-aged people as a new, fertile ground ready to join the market. But these cards have been given away so easily, with little interest from the companies about the student’s future financial life, and many young people are paying because of it.

What starts out as a smart financial decision for most quickly turns into a burden. By the time they graduate, the average student will have accumulated more than $4,100 in credit card debt and, without a full-time job, paying it off can be almost impossible.

This act will alleviate much of that.

One of the provisions of the bill requires any applicant under the age of 21 to prove they can pay off any charges, or get a cosigner who also would be responsible for the debt. At MSUFCU, a college-aged credit card applicant would need to show they could afford payments of up to $500 a month to be eligible for a card.

This would make it difficult for many students to sign up for a credit card — and that’s why it’s necessary.

Virtually any person can get a credit card without having to jump through many hoops. On college campuses, credit companies have tried to solicit students by offering free T-shirts or even a food coupon to sign up for what could be a lifetime of credit.

If a student can’t be expected to pay off credit debt, they shouldn’t be allowed a card. It might seem like the government is intervening in citizens’ personal finances, but it’s far better than letting people gather large amounts of debt before they even start earning money. This act can protect people from themselves.

Also, this bill prevents credit companies from increasing that debt. The bill would prohibit any retroactive interest rate hikes by the credit company. When credit companies are allowed to hike rates, they put people even deeper in debt. The easiest way to keep people paying money is to make sure they always owe. With this act, credit card companies lose that power.

The most significant problem with this bill is the cosigner. If someone under the age of 21 can’t afford a card, they’re required to get a signature from their parent or a cosigner. The foundation of this logic is sound, but the age limit should be lowered. At 18 years old, people are legally considered adults and should earn the rights of adulthood. If an adult chooses to have a credit card, they should be allowed that responsibility. They should be warned of the potential problems, certainly, but they shouldn’t be outright prohibited.

Finding a cosigner also doesn’t prevent people from accumulating debt. It only splits that debt with another person. The requirement doesn’t eliminate the real problem — mismanagement of money.

The act helps an industry that needs legitimate changes in structure. Making sure people with cards can afford it is a smart move, but the people without one still need financial protection as well.