Consumer groups have expressed alarm over the ease at which college students can get credit cards. According to some of the advocacy groups, the prevalence of plastic on campus has had a negative effect on the financial health and spending behaviors of many college undergraduates.
Linda Sherry, a representative for San Francisco-based national consumer education and advocacy group Consumer Action, says that card companies often target young consumers because they are aware that parents will pay for the bills. Sherry adds that most banks also know that the students will get high-paying jobs after graduating, making it relatively easy for them to pay off credit card debts.
Availing of a credit card with a modest credit limit in campus is quite easy, experts contend. Most universities and colleges allow card companies to set up booths to recruit new cardholders. Campuses also stand to gain millions from the card issuers, making cards even more accessible for college undergraduates.
A new law set to take effect in February of next year is expected to change all that. Obama's Credit Card Act of 2009 will set tight regulations on how credit card issuers and other financial institutions manage card accounts. One provision of the new legislation will prohibit consumers under the age of 21 from getting hold of plastic unless a relative or guardian co-signs. Students, however, can provide proof of income to get a credit card.
Experts agree that the law may bring about the much needed change in the credit industry. They warn however, that college students may lose precious time in building up good credit histories if they will be allowed to avail of plastic when they are already 21. Specialists also contend that if credit is handled responsible, students can start establishing good credit scores, paving the way for more opportunities in the future. Clean credit records can mean access to better car or housing loans.
Consumer activists, on the other hand, are saying that the law will be beneficial for undergraduates, especially since credit card debt has grown substantially in recent years. A recent study conducted by Sallie May revealed that the average student graduates from college with $4,700 in credit card debt. This figure is 62 percent higher than in 2004. Young consumers back then owed an average of $2,900 to card companies by the time they graduated. The same study also showed that 84 percent of college students have had at least one credit card in the past. The average number of cards undergraduates own stands at 4.6.