New Credit Card Law Tightens Students' $pending
By April C. Thornton
How would you define the term credit card if someone randomly asked you? Google.com defines the term credit card as a "plastic card, with a magnetic strip or an embedded microchip, connected to a credit account and used to buy goods or services." Whereas, majority of college students would define the term credit card as a way of life, a breath of fresh air, establishment of credit, their partner in crime and supplying other necessities. There are no limitations to what a credit card can be used towards.
In May 2009, President Barack Obama signed the Federal Credit Card Accountability, Responsibility, and Disclosure Act into law. The new credit card law strives to decrease the amount of credit distributed to young adults and allow them to think twice before filling out credit card applications without knowing the pros and cons.
According to the Consumer Credit Counseling Service of Maryland and Delaware (CCCS) news release, College Students and Credit: There's a New Law, But it Still Pays to Be Informed mentioned that the new credit card law prohibits young adults under the age of 21 to obtain a credit card without verifying their income to support their debt or their parents must co-sign for the credit card account. Also, "Credit reporting agencies, such as Equifax, Experian, and Transunion, cannot supply the credit reports of under-21 consumers to credit card companies unless the consumer specifically asks that they do so," stated by the CCCS.
In recent studies, Congressional members who created the factors of the new credit card law noticed that college students have a huge amount of credit card debt during and after college. The CCCS stated that "84 percent of undergraduate polled in last year's Sallie Mae study had at least one credit card, and half had four or more." They continued to breakdown the estimated amount by stating that "students carried an average balance of $3,173 and only 17 percent regularly paid their credit card bill in full each month." Shockingly, the study found that "freshmen carried a median debt of $939, nearly triple the $373 owned in 2004, while seniors graduated with an average credit card debt of more than $4,100, up from $2,900 just five years ago."
Lori Jankalski, executive vice president, CCCS said, "Before the new credit card law took effect, college students often made multiple applications for credit card accounts. Having so many cards placed them at increased risk of getting into too much debt. According to a recent Sallie Mae survey, last year's undergraduates had an average of 4.6 credit cards and carried about $4,000 in credit card debt. The limits provided by the new law will give students the breathing room they need to make more informed financial decisions."
Senior Miesha Gay stated that she agrees with the new credit card law because several students do not understand the details and responsibilities that come along with having a credit card. She continued to say the new credit card law will allow students to make adult decisions and be aware of the penalties.
Even though, the new credit card law does not control the amount of money students may spend, it will definitely stabilize the amount of debt students owe to the credit card companies during and after college. The new credit card law works in students favor because it allows students to graduate with owing less or no money to credit card companies.