Almost 18? Do you REALLY know the new laws that apply for credit cards?

By: Raevyn Jones, Marketing Coordinator, NHS of Baltimore

In dealing with growing pains of the teenage years, many children cannot wait until the age of 18. According to them, this is the age where they become officially grown and the sky is the limit, right? Wrong. Yes, at age 18, Americans become eligible to vote, enter the military, serve on a jury and marry without parental consent, in most states. But recent laws have prohibited the milestone of getting a credit card.

What many soon-to-be-18-year-olds don’t know is that President Barack Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The bill restricts credit card issuers from raising interest rates without warning, penalizing customers who pay on time and levying excessive fees. There's also a provision that specifically concerns young people: Under the new law, no one under age 21 can get a credit card unless a parent, guardian or spouse is willing to co-sign or unless the young adult has proof of sufficient income to cover the credit obligations.

According to Sen. Barbara Mikulski, D-Md., the bill aims to prevent credit card companies from "targeting college kids to weigh them down with debt before they even graduate.” Research shows that this law should have probably been taken into effect years ago. In April, student loan corporation Sallie Mae released a national study that examines the use of credit by undergraduates. The study found that in 2004, 76% of undergrads had at least one credit card. Today, 84% do. The average amount students say they charged to their credit cards to pay for education expenses (such as school supplies) has increased from $942 in 2004 to $2,200 currently. What's more, 82% of undergrads with cards report that they do not pay off their full balances every month, and the median debt among this group is $1,645, compared with $946 in 2004.

Due to the lack of financial literacy steps being taken to educate college students effectively about the pros and cons of credit cards, I think that this policy was long overdue. In Freshmen Seminar classes, they have professors trying to explain the financial advantages and disadvantages of credit cards. Because these professors are not financial experts, students still do not have the proper understanding of credit before they sign up for numerous credit cards. I think all institutions should incorporate a financial literacy course in their curriculums taught by certified advisors. This will save a lot of people’s credit in the long run.