Last Spring, as Congress and the President considered the rules that would go into the CARD Act, one concern was to prevent banks from targeting young people and enticing them into debt through student credit cards.
Credit card companies often set up on college campuses, offering incentives to college students to “sign up today.” These were everything from teddy bears to backpacks to pizza coupons, and students were eagerly accepting the gifts.
Others, including high school students, received seemingly attractive student credit card offers in the mail.
Sadly, many of those credit card accounts were what are generally known as “fee harvester” cards. When a consumer makes application and is accepted for such a card, he or she is hit with a hefty bill for “fees” before ever using the card. These can include application fees, activation fees, monthly fees, and more.
The students, in their eagerness to own a student credit card, didn’t stop to read the fine print.
In addition, widespread concern over growing debt loads among youth led these lawmakers to restrict credit availability to young people.
When the CARD Act’s provisions go into effect in February, students will be required to have either a job or a co-signer in order to receive a credit card. In addition, the credit limit on such cards will be severely restricted.
Unfortunately, legislation such as this has a dark side for students.
The fact is, upon graduation students who have established credit will have a far easier time entering the workplace, renting a home, and buying a car. Rather than avoid using a credit card during these school years, students should establishing a record of responsible money management through wise student credit card usage – and thus building high credit scores.
The first step is to ignore the solicitations – either in person or by mail – and do the research to find a card with good rates and terms.
Next is to do it now – before February rolls around and the opportunity is lost.
Once you have the card, use it sparingly, but use it. Make it a point never to let your statement show a balance in excess of 30% of your available credit. If you’ve gotten a card with a $200 limit that means you won’t be buying much – but also means you should be able to pay off the balance each time the statement arrives. Use the card at least once every 3 months to avoid having it closed for inactivity.
Author:Marte Cliff
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