Effect of CARD Act on Students

Credit card reform has been long in coming, and given lenders’ nearly free reign to manipulate rates, any form of cardholder protection is wonderful.

Now we have the 2009 Credit CARD Act, clamping down on predatory practices that keep some debtors continually in the red.

Sounds like a big boost for college students, who often use credit as a means of staying afloat through school. Right?

Perhaps. Let’s start with some reforms that have relatively minor impacts:

New interest rates for only new balances. This means penalizing rates will only take effect after a slip-up (no retroactive rates), and only on the accounts in which it occurred. While this is extraordinary help for spenders chronically in debt, most students have only started building credit, and have little “past” to worry about.

Principal payments are first applied to the debt with highest interest rate. Another godsend for overburdened debtors, this also can benefit students, especially if you’re coming off of a promo rate or using interest-heavy cash advances.

45 days notice before rate changes. Although staying informed is beneficial to everyone, this has little direct help for student’s finances— unless you’ve accumulated so much debt in school that you must to pay it all off before a hike.

Freezing accounts at the credit limit. It’s always great to avoid penalties, but this should not be an issue for anyone if they’re mindful of how much they spend.

But the big reform overshadowing all others:

Anyone under 21 must have a co-signer to open an account. The only exception is if a student can prove that they have a job and the fiscal ability to pay their credit card bill.

Is this help or hindrance for students?

In one sense, it selects only the most “responsible” (gainfully employed) to have the benefit of plastic. This should cut down on debt racked up by students apparently auditioning for Credit Gone Wild.

Yet it also keeps students from building good credit through small, responsible purchases if they don’t have a qualifying job. And if they can’t get a co-signer, their credit days are put on delay.

Underlying message: the CARD reforms don’t change the game, but make it pay more to spend responsibly.

Alexander Carl

Alexander Carl

I find it difficult to brag about myself. Too modest? Perhaps.

Anyway: my name is Alexander Carl. I am a recent graduate of the University of North Carolina at Chapel Hill, where I spent four blissful years earning a degree in Communication Studies. Now I face the real world of economic downturns, student loans, and the absence of “academic” camaraderie.

Yet I refuse to be bummed. My economic philosophy is to live simply, save, and maximize whatever I can. Consumer culture is undeniably pervasive, but you don’t have to sell your soul to co-exist with it— there is great power from using your economic resources wisely.

I started writing when I figured out how to hold a pencil. Since then I’ve written short stories, poetry, screenplays, and have blogged. In fact, three of my screenplays have been produced into short films, two of which I directed. I’m no stranger to the media, having served as a DJ at a freeform radio station and worked as a crew member for live TV.

Pastimes include traveling (I’ll visit virtually anywhere), swimming, jogging, hiking, and hunkering down with a good movie.

Overall I’m a peaceful person, though not in a creepy New Agey way. I get my energy from music, good conversation, and the outdoors (I was an active Boy Scout, earning my Eagle). I consider myself “inquisitive” and “wry”, and for the sake of autobiography I’ll assume that I am.
Alexander Carl

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