Consumers Union, the nonprofit that publishes Consumer Reports magazine, has produced an electronic “care package” from “Money Mom.” The link contains tips warning students about credit card companies’ efforts to sign up students ahead of sweeping changes to the industry in February, when the Credit Card Accountability, Responsibility and Disclosure (CARD) Act goes fully into effect.
On Feb. 22, card issuers will no longer be able to market to customers under age 21 unless they have a cosigner or can prove they have the means to pay their bills. Issuers can’t entice applicants with trinkets or other material goods, and schools must disclose any marketing agreements with the issuers. (These relationships often enrich the school at the expense of students, as this story in The Atlanta Journal Constitution demonstrates.)
Whether the issuers are ramping up efforts to sign up young customers to beat the February deadline or whether they’re doing the opposite by weaning themselves off of this lucrative market is unclear. Consumers Union has a link asking for students to share their experiences to get a better idea of the climate on campus this fall.
Consumers Union sent the package to more than 600,000 people who may click on a link from the home page to send it to “students they care about,” says Tim Marvin of CU’s West Coast office, based in San Francisco.
The materials emphasize just how deep a hole students can dig themselves into by overusing credit cards. Included is a calculator created by the Federal Reserve that shows how long it can take to pay down revolving debt. The average senior graduates with $4,138 in credit-card debt. Even at the relatively low rate of 11.99 percent, it would take 18 years to pay that off at the minimum monthly payment of $83. The total interest paid would be $3,526.
Among the tips, CU urges students to pay off their balances each month and to pay attention to fine print about late fees. The links also contain information on alternatives like prepaid debit cards, and even how to shop for an affordable cell phone plan or a used car.
CU hits hard on the CARD Act provision that allows those under age 21 to get a card if they get a cosigner. The cosigner doesn’t have to be a parent or even a relative; anyone age 21 and over will do.
“We are very concerned that students and other young adults aged 21 and over will be asked by their friends to sign for them, and may do so without realizing that cosigning makes the signer fully obligated on the debt,” Marvin said.
Bottom line, Marvin said, is that most teenagers don’t really need a credit card. “Because a mistake in handling credit stays on the credit record for seven years, waiting until the junior or senior year of college to get a credit card is a good choice for many students.”
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You know not marketing to people under 21 is a good idea. Most of them have no idea about money. Most states even feel you cannot drink until 21 so why should we let them go into debt that young!!