How the Credit CARD Act Affects Young Adults

The provisions of the Credit CARD Act of 2009 targeting youth and credit will be going into effect Feburary 22, 2010. President Obama is on a mission to reduce the availability to young consumers in an effort to solve a problem that hurts so many of us college graduates today – we graduate with too much debt.

Here is a summary of the major changes that will affect young adults:

1) Less Access to Credit Cards Before the Age of 21
The CARD Act’s most significant rule is putting the lockdown on availability of credit cards to young adults. Reckless spending has always been an activity that people identify with the similarly ruthless lives of many young adults. Well, the time has come to limit the spending power of everyone under the age of 21.

• Credit cards can no longer be issued to anyone under the age of 21 with the exception that
  (i) they have an adult (of at least 21 years of age) to co-sign the credit card agreement.
  (ii) or, they can provide proof that they are able repay the debt they incur.
• Pre-screened credit card offers cannot be available to consumers under the age of 21.
• Joint credit card accounts can only have their limits increased with the permission of the adult accountholder.

2) A Close Watch on College Campuses
College campuses are hotspots for credit card companies. Their pretty booths with free t-shirts, pens, toys, and other stuff will cease to exist within close proximity of campus locations. Hopefully, less college students will become victims of consumer debt.

• Credit card companies are banned from offering free goodies as incentives to get students to sign up for credit cards in or near campus.
• Companies must also disclose the details of their contracts with colleges and universities regarding their marketing towards students and alumni.

3) Promotion for Financial Literacy
A major reason why everyone is having problems with debt is because they didn’t learn how to handle money at an early age. Now, the government is taking the initiative to change this trend that is ruining the financial futures of people.

• The act will require certain federal agencies to examine federal financial and economic literacy programs available to the youth ranging from kindergarten to 12th grade and adults.
• They must also recommend methods of funding and promotion of financial literacy programs.

Some of My Predictions
I’m guessing I was fortunate enough to not be caught in the middle of these changes. For those who are actually financially responsible during their younger years, the Credit CARD act may be a slight, but not major, setback. Also, just because these particular provisions are targeting young adults, it doesn’t mean they are the only ones affected – parents should embrace these changes as well.

For the future I foresee that:

• there will be less credit card debt for college students
• there will be a larger burden on parents to support their children
• students will borrow more on college loans
• college students are no longer a profitable market for credit card companies
• credit card companies will find loopholes to extend credit to young consumers
• many co-signers will have their credit histories ruined
• personal finance classes would be a standardized educational requirement

Alcohol is prohibited to everyone that is under the age of 21 but we all know that law hasn’t much of a restraint. How will this act fair in making a difference?

What are some of your thoughts on this act and how it’ll affect the younger generations? Share some of your predictions on the effects of this legislation.

(Photo credit: Rain Rannu)

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