New federal legislation designed to protect consumers from predatory lending practices is going to make it more difficult for college-aged people to get credit cards.
Beginning February 2010, the Credit Card Accountability, Responsibility, and Disclosure Act will require people under the age of 21 to provide proof of income and have a cosigner to get a credit card.
Stephen Ciccone, associate professor of finance at UNH, believes that the income requirement will stop at least half of college students from applying. He also said the legislation comes in an already difficult credit climate.
“Even those in good credit standing are having their limits slashed,” said Ciccone. “Banks are far less willing to lend, whether it is because they are uncertain about borrowers’ ability to repay them or [are] short on cash.”
Ciccone and William Johnson, Ciccone’s colleague and associate professor of finance, both agree that this legislation will be helpful in protecting irresponsible borrowers.
“Interest rates won’t skyrocket out of nowhere,” said Ciccone. “The law won’t make a big difference to those who use or would use their credit cards wisely. Young people are sometimes more responsible than older people with their credit cards. Credit card companies love people with large balances who only pay the minimum every month. They make a lot of money through interest.”
The best piece of advice Ciccone could give young credit users is to pay off their balance in full every month, while Johnson advises young credit holders to maintain responsibility for their debt.
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