Student Credit Card Rules Changing
Credit card issuers set up tables on college campuses to entice passers-by to sign up for student credit cards in exchange for stuffed animals, pizza coupons, CD’s, and other gifts. The urgency to “fill this out right now” discourages these students from reading the fine print, so they sometimes have an annual fee charge on their account before the card even arrives.
With high interest rates and high credit lines, many students find themselves deep in debt to credit card companies long before they enter the job market.
Some of that is about to change.
Under the Credit Cardholder’s Bill of rights Act of 2009, credit card issuers will have a few rules to follow regarding student credit cards.
First, they will, in most cases, be prohibited from extending credit to any person under the age of 18. (If a parent or guardian is the primary account holder, they can still carry a card in their own names.)
Creditors will be prohibited from opening a student credit card account for any student who doesn’t have a verifiable income – or if they already have a credit card account with that company or any of its affiliates.
If the student does have a verifiable annual income, the maximum credit extended cannot exceed 20% of annual gross income, or $500. The maximum for all credit card accounts may not exceed 30% of gross income. This rule can be waived if the student has an approved co-signer.
Since the interest rates and annual fees for student credit cards varies from one issuer to the next, parents and students should do the research and choose the correct card. Responding to a solicitation in the mail or filling out an application in order to get a free gift can lead to a credit card with undesirable fees and interest rates.
But there’s good news on that score too. Should your child sign up for a student credit card only to find that owning it is not in their best interests, they can cancel the card within 45 days. The card issuer will be required to report cancellation to the credit bureaus – freeing up the student to obtain a better card.
