Submitted by:  Beth Parker, ECMC

The days of college students signing up for credit cards with little or no income are numbered. In February of 2010 the recently passed Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 will make it much more difficult for students to sign up for credit cards.

After February, credit card marketers will be banned from campus and can no longer offer those little inducements to students to apply (teddy bears, free I-tunes...you name it, they’ve given it away). The credit card companies are expected to make a big push to encourage students to apply for credit cards before the rules take effect.

Criteria for approval on a credit card application have already tightened due to the woes gripping financial institutions. Schools might want to consider making it more difficult for card issuers to approach students in the interim in order to help students avoid a financial commitment that they cannot afford.

The new rules will prohibit students under the age of 21 from signing up for a credit card without income or a co-signer. Many financial planners are suggesting that parents not co-sign credit cards with their student, as most do not need their own credit card until they have income to pay for any charged items. There are other options, aside from student credit cards, to cover extra expenses and emergencies while in school.

By February 2010, as stated in the Credit CARD Act of 2009, not only will schools be prohibited from allowing card issuers or creditors from offering inducements, those offering credit cards are not allowed on or near the campus of an institution of higher education or at a higher education event sponsored by the institution.

Other changes in the law affecting many students are:

Schools must also disclose any agreement made with a card issuer or creditor for the purpose of marketing a credit card. Extensive requirements are involved in any disclosure agreement.

The CARD Act is aimed toward traditional-aged students. Non-traditional students may continue to be targeted by credit card offers and may have their own financial challenges unique to those who pursue a college education later on in life.

Students continue to be hungry for financial literacy information and will also have serious concerns over how to build a credit history without access to credit cards. It remains to be seen whether the long term effects of limiting credit card access will help to put students on a solid financial footing or whether another source of funds will develop.

Ultimately, making wise financial decisions are what put students on a solid financial path. It’s more important than ever to provide information on wise money management practices. Part of the CARD Act also recommends credit card, debt education and counseling sessions offered as a part of orientation. Credit card counseling sessions could begin this fall too. There are numerous ways to provide this information to your students including links to appropriate web sites, printed materials around campus, as well as access to financial literacy workshops.

Credit CARD Act Links:

http://www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders/

http://www.thomas.gov/cgi-bin/query/D?c111:6:./temp/~c111rch4ao