But College Students Still Get Offers For Credit Cards
Jim Hawkins, an associate professor of law at the University of Houston Law Center, published an assessment of the CARD Acts effectiveness in 2012. We got in touch with him for this piece and asked if he could update us on the effects of the CARD Act and his advice for college students who have a credit card.
Issuers can offer free food and t-shirts 1,001 feet from campuses, so students still have to be on the lookout.
Jim Hawkins, University of Houston Law Center
Hawkins points to how card issuers can comply with the letter of the law, but perhaps not with its intent. For example, issuers can offer free food and t-shirts 1,001 feet from campuses, so students still have to be on the lookout, says Hawkins. Or issuers can give tangible gifts to credit card applicants at local off-campus hangouts. He also says that issuers can still market cards to students on campus without offering them a tangible gift.
The income requirement to qualify for a card on your own could be difficult to meet unless you have a part-time or full-time job. But according to Hawkins, students only have to show they can make the minimum monthly payments, not repay the entire debt.
In some cases, students can list their student loans or money from relatives as an income source in order to get a card.
Affinity Cards
Didn’t The Card Act Stop Credit Cards On Campus
Besides, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 means that anyone under the age of 21 can’t get their hands on a credit card unless they either have a co-signer , or prove that they have income. And universities aren’t allowed to market on college campuses anymore. Right?
Well, not exactly. The Credit CARD Act doesn’t stop credit card companies from marketing on college campuses. What the issuers no longer can do is offer freebies to students. In the past, credit card companies would dangle a free T-shirt in front of a student just for signing up for a credit card, which, if you think about it, is not a great start on the road of fiscal responsibility.
A college-aged kid with very grown-up debt will be less common than it used to be, to be sure. However, according to a report from the Federal Reserve, issuers are still paying big bucks for the privilege of issuing affinity cards. While your under-21 can’t get a card today, the issuers still want them to be loyal to their school and their student credit cards once they can.
Why Credit Card Companies Target College Students
Erika Rasure, is the Founder of Crypto Goddess, the first learning community curated for women to learn how to invest their moneyand themselvesin crypto, blockchain, and the future of finance and digital assets. She is a financial therapist and is globally-recognized as a leading personal finance and cryptocurrency subject matter expert and educator.
A 2019 Sallie Mae survey found that approximately 30% of college students with more than $1,000 in credit card debt owed more than they did the previous month. About 6% of the students surveyed had more than $5,000 in credit card debt. When youre just graduating college, getting your first real job, and trying to make it on your own, credit card debt is the last thing you need to worry about.
Youll have rent and utilities to pay, possibly a car loan, and student loans if you used them. Thats more than enough for a 20-something person, just out of college, to think about each month.
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Other Ways To Build Credit
You usually have to be enrolled in college to qualify for a student credit card, but there is one exception: The Journey Student Rewards from Capital One doesn’t require proof of college enrollment to qualify.
Otherwise, if you aren’t a student or you are a recent grad who didn’t have a credit card in college, the Petal® 2 “Cash Back, No Fees” Visa® Credit Card is Select’s number-one choice for people looking to build their credit history who don’t want to use a secured card.
The Petal 2 Visa Credit Card doesn’t charge many of the most common credit card fees. Credit newbies can learn credit card basics without worrying about paying annual fees, late payment fees or foreign transaction fees. However, if you do make on-time payments, you can earn more in cash back after a year. This is a great way to encourage timely payments, which is the most important factor of your credit score.
Information about the Capital One Platinum, Citi Rewards+ Student Card, and Journey Student Rewards from Capital One has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
Petal 2 Visa Credit Card issued by WebBank, Member FDIC.
Editorial Note:
What Does A Fico Score Of 8 Mean
FICO 8 scores range between 300 and 850. A FICO score of at least 700 is considered a good score. There are also industry-specific versions of credit scores that businesses use. For example, the FICO Bankcard Score 8 is the most widely used score when you apply for a new credit card or a credit-limit increase.
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Is It Bad To Have 2 Credit Cards As A Student
It may seem like if one card is good, more can be better. But it can be hard to keep up with more than one credit card and multiple card payments. This is especially true if you also have student loans and other monthly bills to keep track of. It can be very easy to fall into credit card debt with too many cards.
Who Should Apply For A Student Credit Card
Simply being a college student isn’t enough by itself to qualify for a student card. Here’s what you need to know.
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Student status might matter. Check the card’s terms and conditions on the issuer’s website for application eligibility. For example, the Journey Student Rewards from Capital One does not have an explicit student requirement, while the rules for the Discover it® Student Cash Back say “You must be a college student.”
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Federal law limits who can get credit cards under age 21. Issuers are prohibited from providing cards to people under 21 unless they have proof of independent income or a co-signer someone who agrees to be responsible for the debt if the primary cardholder doesn’t pay the bill. This can be a roadblock since most major credit card issuers dont allow co-signers.
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Those 21 or over are also required to provide proof of income. However, they can list any income to which they have reasonable expectation of access.
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Bad credit is usually a dealbreaker. Student credit cards are designed for people with little or no credit history. If you have bad credit because of missed payments or other missteps, you probably wont qualify for a student card on your own. In that case, look to a card specifically designed for people with bad credit.
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There Should Be No Credit Cards
Be No Credit CardsIntroductionToday many people blame their credit card debt on the economy. With their being so little employment with very little income we are forced to live under our means. Credit is usually misused and accumulates large amounts of debt. Many people use credit cards for daily expenses or to buy their wants rather their needs. Often times, credit cards are used to pay rent, utilities and other daily expenses due to people living off of paycheck to paycheck and do not make
Role Of Parents And Guardians
Parents and guardians can help educate their child to encourage good spending habits and healthy debt management. They can teach their teen or young adult about both the benefits of having a credit card and the devastating consequences of misusing one.
If you are a parent of guardian of a young adult getting their first credit card, consider discussing the reasons why its important to have a credit card and credit history. Also consider helping them find a credit card that fits their needs, such as one with a lower APR, lower credit limit, and lower late fees.
You can guide them through making the monthly payment, so they know what to expect.
Finally, if you are a co-signer on a card or have added your teen or young adult as an authorized user, review any ground rules. Explain what the credit card should be used for and who is responsible for the payments.
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The Best Cards For Students
According to Sallie Mae, over half of students have a credit card, and most only have one. And while the average credit limit for first credit cards is significantly less than my first unsecured credit card, college students can still benefit from building credit with a new card, provided they spend within their means.
There are numerous college student cards available, each providing unique benefits for different types of students from foodies to international students to commuters. These cards tend to be more lenient with credit history requirements, but you do have to be 18 and have a steady source of income.
One option is the Citi Rewards+ Student Card, ranking on CNBC Select’s list of best student cards for making small purchases and shopping at the supermarket. And if you have no credit history or you are an international student, consider the Deserve® EDU Mastercard for Students, which also makes our best-of list.
Learn more:Read our full breakdown of the best credit cards for college students.
The Impact Of Credit Cards On American Life
Ever since the introduction of the credit card to American life, personal debt has been a major issue for many Americans. Because credit card bills do not have to be paid until the end of the month, people tend to spend more when using credit cards. Some companies offer grace periods beyond the billing date for the bill to be paid before charging interest, though many companies are moving away from offering this grace period. If the card holder is unable to pay the credit card bill on time, the interest will start adding up, causing the card holder to owe more than they charged in the first place . This is a major problem if they are charging more than they can afford in the first place.
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Make The Most Of Your Student Credit Card But Be Careful About Overspending
Having and using a credit card isnt inherently bad. Rewards programs can save you money or help you travel for free, credit cards may offer more consumer protections than debit cards, and building your credit early can be a useful strategy. A strong credit history can improve your chances of getting approved for a loan with a low interest rate and may help you when you go to rent a home or apply for a job.
One of the keys to using a credit card to build your credit, and avoid paying interest, is to treat the card as if its a debit card. Only use it for purchases if you have the money to pay your bill in full and always pay your bill on time .
But its easier to read this idea than put it into practice. There are studies that show people literally spend more at fast-food restaurants if they pay with cards, Hawkins says. The big risk with credit cards for students, in my mind, is that it is just so easy to spend money.
Louis DeNicola is a personal finance writer with a passion for sharing advice on credit and how to save money. In addition to being a contributing writer at Clearpoint, you can find his work on Credit Karma, MSN Money, Cheapism, Business Insider, and Daily Finance.
Troubling Or Just Business As Usual
As with anything, the answer probably depends on one’s point of view. Sharon Lechter, the co-author of the modern-day personal finance classic “Rich Dad Poor Dad,” has earned the right to be cynical about colleges and credit cards, considering her son accrued $2,500 in debt during his freshman year in college.
But in spite of that, Lechter sounds pretty encouraged by what has transpired since the Credit CARD Act became law. “The number of credit card accounts among college students fell 17 percent after the CARD Act, and I feel pretty confident saying that was due to not being able to offer free pizza and T-shirts for a kid filling out an application,” says Lechter, who is also a CPA and founder of the Paradise Valley, Ariz.-based financial literacy company Pay Your Family First. But she adds, “The issue isn’t the credit card. The issue is the lack of how to use it.”
Lechter says that if colleges are going to help credit card companies market to their students on campus, that may not be so bad, especially if the card has reasonable terms and a low interest rate. But schools need to do a better job of educating their students. “We need to educate young people about how to manage money but also how to make money, as in how to become entrepreneurs,” Lechter says. “That’s the only way we’re going to save this generation.”
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How Credit Cards May Benefit Students
On the other hand, having a credit card can provide some critical lessons on managing credit that can be valuable throughout life. Despite all of the potential negative consequences of credit card debt, many students can benefit from having a credit card.
A credit card can help establish a credit history. For one, an important factor of your FICO score is the length of credit history. So, the sooner you establish a line of credit, the longer your credit history will be when it’s time to apply for, say, a mortgage or car loan.
With a credit card, you can also start to prove you can make timely payments and manage the proportion of your debt to credit by paying down your debt each month, both of which will also boost your credit score.
Credit cards can also serve teens or students in an emergency. Most students dont have a significant emergency fund, but credit cards give them ability to pay for necessities during an emergency situation.
For example, if your car breaks down, or you need to fly home for an emergency, a credit card can provide a good safety net to cover those expenses. Of course, it’s important to have a plan to repay the debt you rack up during an emergency as quickly as possible.
Pouncing On The College Prey
Anyone visiting a college campus in recent years has been shocked at the aggressive and senseless marketing of credit cards to people who don’t have jobs. The results can be devastating. Recently, two college students in Oklahoma gave up on their credit card debt and committed suicide with the bills lying on the bed beside them.
Vince called my radio show with a problem that has become a trend. Vince signed up for multiple cards during his sophomore year at college to get the free campus t-shirt. He wasn’t going to use the cards unless there was an emergency, but there was an “emergency” every week, and soon he was $15,000 in debt. He couldn’t make the payments, so he quit school to get a job. The problem was, without his degree, his earnings were minimal. Worse than that, he also had $27,000 in student loans. Student loans aren’t payable while you are in school, but when you leave school by graduating or quitting, the payments begin.
Vince was one scared 21-year-old with $42,000 in debt but making only $15,000 per year. What’s scary is that Vince is “normal.” The American Bankruptcy Institute reveals that 19% of the people who filed for bankruptcy last year were college students. That means one in five bankruptcy filings were by very young people who started their lives as financial failures. Do you still think it is wise to give a teen a card? I hope not.
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Should Teens And College Students Have Credit Cards
David J. Rubin is a fact checker for The Balance with more than 30 years in editing and publishing. The majority of his experience lies within the legal and financial spaces. At legal publisher Matthew Bender & Co./LexisNexis, he was a manager of R& D, programmer analyst, and senior copy editor.
For teens and young adults who are just starting to establish their credit, credit cards have some significant pros and cons to consider.
Credit card debt is a major problem for many people, and every year millions of people of all ages find themselves struggling to manage debt. Interest rates rise, payments get missed, and plunge. Credit card debt can be destructive, but credit can also play an important role in a healthy financial life.
Buying a home, renting an apartment, getting insurance, applying for a job, are among major life steps that require having a good credit history, which includes proving you can manage credit.
What Do Banks Get In Return
So what are the colleges giving the credit card companies for the money? As you might expect, among other things, they’re shelling out phone numbers , email addresses and snail-mail addresses of students and alumni, and, yes, as noted, the issuers are often allowed to come onto the campus to market student credit card offers.
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