The Financial Student

Back in May, the United States Congress passed a piece of legislation called the “Credit Card Accountability Responsibility and Disclosure Act of 2009“. The law goes into effect today, so I thought it would be the perfect topic to discuss. Basically, this new law creates a lot more rules and policies that the credit card companies have to follow. One of the major pieces of the law concerns those who are 18 but not 21 yet, so this is important for all you about to graduate high school or enter college.

What’s New?

1. If you are not 21 years old, you cannot open a credit card account unless:

• You have a cosigner (mom, dad, grandparent, guardian, sugar momma, pimp, etc) 21 or over who can prove they have the income necessary to pay the bill should you decide not to pay.
• You yourself can prove that you have a high enough income to pay off the bill.

2. Companies are banned from giving away “free” t-shirts, frisbees, food coupons, one night stands, etc. near college campuses in order to get you to sign up for a credit card.

3. Pre-screened credit offers (those envelopes from Visa that say “You’re Approved!”) cannot be mailed to anyone under 21 years of age.

Thoughts

I won’t even pretend to be OK with the 1st one. I am so sick and tired of the government acting like 18 year olds aren’t legal adults. The ban on adults drinking alcohol is bad enough, but now something as potentially harmless as a credit card?  And apparently, from the way the law reads, 19 year olds have to prove their income but 35 year olds don’t. How is that logical?

Yes, I know that this will probably ensure that fewer young adults experience the horror of credit card debt, but where does the hand holding end? I might even argue that some credit card debt is beneficial. For every person who charged $30,000 dollars worth of crap and had to declare bankruptcy, there’s probably a hundred more who learned how to use credit responsibly after just a few bills. Either way, I’m a fan of personal responsibility and not rules.

For the second rule, I don’t have any problems. I honestly thought colleges would have put a stop to this a long time ago. Maybe enough parents didn’t complain?

Number three: THANK GOD! Less junk mail is always a plus.

Finally, I just find it a bit ridiculous that there’s no problem with allowing 16 year olds (sophomores in high school) to drive cars (which can easily KILL people) but giving a credit card to a 20 year old is suddenly punishable by a $2000 dollar fine. (That’s how much Visa or MasterCard could be charged if they allow say a 20 year old with no income to have a card.)

For more details, which apply to all credit card accounts and not just those held by 18-21 year olds, check out this easy to understand guide.