Credit Cards » Credit Card News » Parent Empowering Credit Card Legislation to Curb College Student Debt
Date June 1, 2009

Parent Empowering Credit Card Legislation to Curb College Student Debt

Signed a few days before Memorial Day, the credit card bill provides wide ranging legislation to curb the rampant “profit-is-the-bottom-line” practice of credit card companies. Among the many areas the credit card bill will touch is the debt laden, below 21-year old credit cardholders. This particular population of credit cardholders is largely composed of college students.

Parent Empowering Credit Card Legislation to Curb College Student DebtCredit card debt problem among college students is well known within the credit industry and its observers. A survey recently released by Sallie Mae shows that 84% of the college student population carry at least one type of credit card. Surprisingly, on the average, a college student carries four credit cards. With their credit lines, the average college student has a debt balance of $3,173. This figure is three times that of four years ago. Considering that the average student does not have the income to pay off their balance, the debt problem among college students is a very serious one. A lot of college students actually graduate college already loaded with credit card debt.

College freshmen are perfect targets for credit card companies. Fresh out of high school and seeking to establish independence, especially in terms of money, college freshmen are easy prey for credit card sellers. Since most of them are also first time credit cardholders, credit card companies are also anxious to lure them in order to build up brand loyalty. So far, credit card companies have been very successful in their efforts, based on the increase of credit card ownership and debt among college students.

With the credit card bill in place, this will soon end. Legislation in the credit card bill strongly prohibits credit card marketing to consumers below 21 years old. Credit card companies will also be disallowed from marketing credit cards inside or near college campuses. Aggressive marketing strategies, which include giving away T-shirts, water bottles, and other items to lure in young consumers to apply for credit cards will also be put to an end.

However, credit card ownership will not be beyond consumers below 21 years old. In order to obtain a credit card, they only have to prove that they are capable of paying their credit or they can get a co-signer for the account. Co-signers are usually either one of the parents or a guardian. Credit card companies are also prohibited from increasing the cardholder’s credit limits without written approval from the co-signer of the credit card.

Because the problem of credit card debt basically hangs on the responsibility of the credit cardholders, responsible credit and debt management will also be part of the orientation program of colleges for their new enrollees.

Date May 22, 2009

Amendment in Just Passed Credit Card Bill to Protect Students

The recently passed credit card bill primarily addresses many of the unfair practices of the credit card industry. One particular amendment in the bill specifically calls for the protection of students. Sen. Bob Corker and Sen. Dian Feinstein are the sponsors of the amendment.

Amendment in Just Passed Credit Card Bill to Protect StudentsCredit card debts from college students are fast becoming a serious problem. Credit card companies often exploit college students, giving credit card offers to them while knowing that they are hardly in the position to be able to pay off their debts. Oftentimes, college students graduate with an already large amount of debt to their name, even before they find employment.

Sen. Corker had this to say, ““Far too often, young adults don’t read the fine print of credit card offers and rack up huge debts that follow them throughout life. As a father of two daughters in college, I’m constantly making sure my girls aren’t signed up for any of the many credit card offers targeting college students.”

About the amendment, Senator Corker explained, “This amendment reforms credit card marketing practices aimed at college students so that the terms are fair, transparent, and more easily understood by the consumer. It would also commission a study to fully examine the problem of student credit card debt so we can help make sure these young Americans aren’t burdened and hampered by excessive debt.”

Senator Feinstein also added that, “Colleges should not be encouraging their students to sign up for products with high interest rates and fees that can get them bogged down in debt.”

Senator Feinstein believes that college students are far more susceptible to get into credit card debt, as they lack the experience and the knowledge on smart credit management. Usually, these debts also stay with them for decades, making it difficult for them to start their professional careers. According to the Senator, the amendment simply puts some “common-sense restrictions” to the credit card industry, which will stop deceptive industry practices from abusing college students as well as other young consumers.

The amendment included by the two senators in the credit card bill will protect students from credit card debt through:

  • disallowing credit card companies to offer gifts to students who apply for credit cards
  • require public disclosure from universities who have marketing agreements with credit card companies
  • require reports from credit card companies on their financial compensations to alumni associations and schools through said agreements and what the companies are getting in return
  • ask for the assistance of the Government Accountability Office to determine the extent of these agreements and their effect on student debt
Date May 20, 2009

Teaching Teeners Better Credit Control with Prepaid Credit Cards

The credit card industry seems to be getting smarter and more creative in their credit card marketing approach. Although some of the marketing styles of credit companies have been a bit questionable as of late, this one is actually a step in the right direction.

Teaching Teeners Better Credit Control with Prepaid Credit CardsDiscover Bank is now issuing prepaid credit cards for the teenage set, with the proper parental control locked in. This practical approach of Discover is being received warmly by parents who understand the convenience of credit cards for teenagers but who also are wary of the financial responsibilities that it carries. With prepaid credit cards, parents get the best of both worlds.

The credit card is essentially an extension of the parent’s current credit card. A special account of the current credit card can be deposited with an amount up to $200 to make the prepaid credit card usable. The account also allows parents some control over the spending habits of their teenagers. These include putting limits on spending, tracking their kids’ transactions, and even creating automatic text alerts that they receive whenever their kids use their prepaid credit cards.

The prepaid credit card also encourages teenagers to spend wisely, as parents will have control on where the card can be used. Parents will therefore have the option of encouraging their kids to spend only in retail shops that they approve of. The prepaid credit card also comes with an automatic block that blocks purchases from bars, liquor stores, and tobacco shops.

Any parent knows the fear of their children misplacing their credit cards and having them used by someone else fraudulently. The prepaid credit card also comes fully protected against fraud in preparation for these situations.

Prepaid credit cards can also earn reward points for their owners. Online discounts and store coupons can be earned by kids whenever they use their prepaid credit card in selected venues and online sites.

Teenagers who have a job also have the option of automatically having their checks deposited to their credit cards every payday.

The prepaid credit card can be very helpful for parents who recognize the convenience of using credit cards for purchases. Furthermore, carrying these prepaid credit cards can be much safer for their kids than carrying cash.

Discover has been marketing these prepaid credit cards as great tools for teaching children smart spending habits. Parents are seeing the other benefits as well such as keeping track of their kids’ spending. The card’s appeal is quite apparent and Discover may have hit on a winning idea with their prepaid credit card idea. Imagine what a generation of prepaid credit card users can do to Discover’s market when they grow out of the credit card “training wheel” phase of their financial life.

Date May 17, 2009

Credit Card Legislation Voting Marked for Tuesday

It seems that President Barack Obama’s all out support for the credit card legislation may finally yield results come Tuesday. According to Sen. Harry Reid, Senate Majority Leader, the U.S, senators have decided that Tuesday evening will be when they will hold a vote on whether the credit card bill will get senate approval or not.

Credit Card Legislation Voting Marked for TuesdayThe credit card legislation under deliberation in the Senate aims to stop controversial credit industry practices. It will also make it much more difficult for credit card companies to issue rate hikes on credit cardholders. The credit card legislation would also greatly limit credit card marketing practices for persons under 21 years of age.

The Senate’s credit card legislation bears many similarities to the Credt Cardholders’ Bill of Rights, which the House passed last April. However, it is much more stringent than the House’s bills in several areas. The Senate’s credit card bill will also take effect much sooner. Once enacted, it will come into effect nine months after. On the other hand, the House’s legislation would only become law a year after it is enacted or on July 1, 2010.

The issue of credit card regulation gained political prominence when households, already heavily burdened with financial problems, cried out against banks who were introducing sudden interest rate hikes and hidden fees, even as they received large financial bailouts from the government.

As a result of the public outcry, President Obama has made the issue a priority and has been calling for support from all sectors. His most recent campaign being his town hall meetings, one of which was recently held in New Mexico. He has also put a lot of pressure on Congress, demanding that they bring the bill to his table when Memorial Day comes.

The banking industry is understandably not very keen about the bill. They have warned that the new regulations being implemented by the bill might lead to a dry up of credit for a number of borrowers. It might also increase all borrowers’ introductory rates.

Whatever the banking industry may have to say on the matter, the legislation still continues to gather steam in the Senate. Sen. Reid recently released a statement saying that the senators had come to an agreement to proceed to a procedural motion vote to proceed to the bill. If the motion is passed, which is highly expected, all pending amendments that remain will be considered by the Senate; after which, they will continue to vote on the legislations’ final passage.