Will New Law Solve Credit Card Problems for Young Adults?

This is a guest post by Bill Hardekopf, CEO of LowCards.com.

College students will be one of the groups most affected by the new credit card law. Currently, credit card offers are easy to find on any campus and available to almost every student. In nine months, it will be much more difficult for college students to get a credit card because restrictions will prohibit issuers from lending to anyone under 21 unless they can prove they can make the payments or get a parent or guardian to co-sign.

But will this restriction placed on issuers alleviate the credit card problems for these young adults?

“Absolutely not. It will help but it may be just delaying the problem. The responsibility to change this really falls on us, the parents,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “We have failed to teach our children the proper way to handle money and the pitfalls of debt. We need to take time to tell them all about credit cards, talk them through your credit card bill. Explain the interest rate, minimum payment, grace period, and the painful finance charges. If you have had late fees or payment problems, use these as teaching examples.”

There is a serious credit card debt and usage problem among college students. A recent Sallie Mae survey showed:

• Average amount of debt carried by college cardholders is $3,173. This represents a 46% increase over the 2004 figure of $2,169.
• 73% of all families now carry a credit card (Federal Reserve Survey of Consumer Finances). That number is actually much higher among college students: 84% have at least one credit card. The average student has 4.6 credit cards.
• Seniors graduated with average credit card debt of more than $4,700, up from $2,900 in 2004.

“If you graduate with a $4,700 credit card balance, you not only have a big debt to pay, but you will likely have a lower credit score that could be very difficult to pull up. That low score may affect interest rates for any loan you have, and may even affect job offers if credit scores are part of the interview process,” says Hardekopf.

LowCards.com recommends a new ‘Charge Responsibly’ program be instituted by credit card issuers.

“Credit card issuers need to do something to show that they care about the financial well-being of their cardholders. This could be a good opportunity for credit card issuers to re-create their image with a ‘charge responsibly’ type of program that teaches college students and their parents how to responsibly use credit cards,” says Hardekopf.

In the Sallie Mae survey, eighty-four percent of undergraduates indicated they needed more education on financial management topics. One-third of the students rarely discussed credit cards with parents.

“Credit card issuers can take the lead to educate consumers about the responsible use of credit cards. Credit card regulations and the issuer’s changes that could follow will probably force all of us to charge responsibly.”

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LowCards.com simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1260 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for eight years.