National credit card act instates new regulations

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There are now two things Americans under the age of 21 are not allowed to do at a baseball game: buy a beer and sign up for a credit card.

The Credit Card Accountability Responsibility and Disclosure Act went into effect on Feb. 22. Under this law, passed in 2009, youth under the age of 21 must have a co-signer or an independent means of paying off their bill to get a credit card.

For instance, if an 18-year-old freshman gathered an enormous amount of debt on his credit card, his parents would have to pay the bill.

CARD was passed in response to the growing credit card debt college students had after finishing school. In a study by SallieMae, a national student aid lender, the average college student graduated with more than $4,100 in credit card debt, compared to $2,900 in 2004.

The study also found the average college student has between four and five credit cards, and 84 percent of students have at least one card.

The state of Wisconsin also passed the Student Credit Protection Act to limit the amount of marketing credit card companies can do on a college campus. Representative Jeff Smith (D-Eau Claire), one of the bill’s authors, stated in a press release that credit card companies view students as a “cash cow.”

“The Student Credit Protection bill is intended to help students avoid predatory tactics from credit card companies that encourage students to sign up for cards they don’t need and can’t afford,” Smith said.

Both federal and state laws limit the ways credit card companies can lure in students to sign up for a credit card. Practices like giving away free hats or shirts at college campuses in exchange for registering for a credit card are now banned.

However, college students having credit cards is not entirely a negative. Mark Eppli, a professor in the College of Business Administration, said 18-year-olds deserve all the responsibilities and privileges of adults.

“The federal government, through banking regulations, looks to protect unwitting students from the pitfalls of credit card debt,” Eppli said. “This doesn’t justify the current regulation, however.”

Eppli explained it would be more beneficial for young people to learn and increase their financial awareness, rather than prohibit them from obtaining credit cards and building up a credit score. He said before getting a credit card, students should take a short exam to prove they understand the risks and the exorbitant interest rates of credit cards.

Credit scores are built through a combination of payment history, types of credit used and the amount of money borrowed among other things, Eppli said.

Valerie Gamsky, a junior in the College of Communication, said she uses her credit cards on occasion in order to build up her credit score. She said she would have liked to have acquired the credit cards under the new federal regulation because it would mean more financial monitoring and accountability on her part.

“(Credit cards) are a really good idea if you have self-discipline,” Gamsky said.

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