Have you visited a college campus recently? If you have then there is one obvious thing missing – the credit card companies! Until just a year ago it was common practice for credit card companies to be posted on college campuses offering free food, tee shirts, and whatever else they could come up with to entice students to apply. These sights aren’t so common anymore now that students are being restricted when it comes to being issued and using a credit card. One facet of the Credit Card Accountability Responsibility and Disclosure Act stops predatory lending practices and incorporates various provisions which protect students.
The New Rules
The act now prevents credit card companies from going after young adults as freely as they have in years before. If under the age of 25, credit card companies can no longer send in the mail pre-approval letters or free promotional gifts. To take it a step further, students under the age 21 have to either prove they have a sufficient income to manage a credit card or have a co-signer. Being a co-signer on a credit card for a young adult can be a risky move and one that should be considered only after knowing all the facts. Another option would be to be added onto a parents account as an authorized user.
The new regulations also forces universities to reveal their relationships with credit card companies to the Federal Reserve Board. This means that schools must be open about their marketing agreements with credit card companies, must share their business relationships and even report any payments made to the school by the credit card companies. In addition, the law encourages schools to provide debt management classes to students.
All these changes have been put in place to protect students and young adults. It is a result of all the massive amounts of debit young adults are accumulating because they are sucked into the buy now pay later scheme. The amount of people who have bad credit is outrageous and these regulations have been put in place to stop this from happening. Today having good credit is more important than ever, especially now that we are hearing more and more about potential employers using peoples credit reports to determine if they should be hired or not. One day students and young adults will hopefully appreciate these measure that have been taken to protect them and their credit.
Co-Signing – Is It A Good Idea?
Co-signing on anything, like a credit card, should not be taken lightly. Here’s why – it is reported that 1 out of every 4 people who co-sign a loan end up paying the balance. When you co-sign you are agreeing to take full responsibility of the account if the account holder does not follow through. In other words you are 100% liable for the account. Here are somethings to consider before co-signing:
- If you co-sign and the borrower misses a payment, the lender can collect from you immediately.
- You are being asked to guarantee someone else’s debt when you co-sign a loan.
- If you co-sign be sure you can afford to pay the loan.
- Your liability for the loan may keep you from getting other credit you may want.