A few years ago the major credit card companies made a lot of money issuing special credit cards for college students. These credit cards were exceptionally easy for a full-time college student to obtain, even though most of them had very little in the way of a credit history.
These credit cards for college students came with all sorts of attractive benefits attached to them and obviously, for most students on a tight budget having such a financial avenue open to them was a very attractive prospect.
The Credit CARD Act of 2009
The downside of these credit cards for college students was that many students quickly found themselves in more debt than they could realistically handle. Spending the money was easy – paying it back not quite so simple. As a part of a fairly comprehensive attempt to reform the way credit card companies work, the 2009 Credit CARD Act aimed to change the way students were given credit cards to cut down on the rising numbers of young people who found themselves in over their heads.
Under the act, which actually did not go into effect until February of 2010 there were a number of things that the credit card companies could no longer do when it came to issuing a credit card for college students. These included:
No longer offering credit cards for students to anyone under the age of 21 unless they had a cosigner.
No longer mailing offers for credit cards for students to anyone under the age of 21 or offer them as a part of on-campus promotions.
Credit card companies were to be prohibited from offering “freebies” to those applying for credit cards for college students in return for their applications.
Have Things Really Changed?
Although the Credit CARD Act was very explicit, a number of credit card companies are still finding plenty of ways to issue college student credit cards – without breaking any laws.
For instance, although they may no longer be able to send out those pre-approvals in the mail the law said nothing about e-mails. That loophole can be exploited because according to the Federal Reserve itself an email address “does not physically exist anywhere, and therefore, cannot be considered an address on or near campus.” So it is still perfectly OK for credit card companies to send out emails offering all the fun extras that always came along with credit cards for college students.
The credit card companies are also still allowed to count the funds from student loans as a valid source of income. Again the vagaries of the Federal Reserve rules enable them to do so perfectly legally. All that the Fed requires is that when issuing credit cards for college students companies obtain “finical information” that demonstrates a college students ability to pay their debts. This means that they can still count student loan funds as just that. See also this post that shows how Cesar Chavez Student Center supports various youth.
Should You or Your Child Get a Credit Card for College Students?
There is an upside to having a credit card for college students. It can be a great way to build a credit history and a great lesson in financial management. The key is to use them responsibly, something that the companies themselves cannot regulate. If you are going to apply for credit cards for college students choose one with the lowest interest rate possible and then only spend what you can realistically afford to pay back. See also this post about minority women starting their own business.