The CARD Act has a provision that puts some limitations on marketing and granting credit cards to folks under the age of 21.
The provision in question is pretty simple — if a person applying for a credit card is under 21, either he or she has to prove independent ability to pay or they must find a co-signer. Whereas Congress probably intended that parents and older siblings would be the designated co-signers, it would appear that we have reverted to the 60's and rather than being asked to buy beer for under-aged minors, older students and friends are now being asked to co-sign for their credit cards. Ah, the unintended consequences of unintended consequences.
There has been serious debate on the issue. Some take the position that young people should have an opportunity to begin to build a credit history on their own from the age of 18 —and not be forced to wait until they are 21. Denying them the ability to do so puts them at a three year disadvantage relative to 18 year olds pre-CARD Act. Others, my bet —the majority, argue that drastic change was required because so many students who were issued credit cards simply because they could fog a mirror —without demonstrating an ability to pay and without a co-signer breathing down their necks— found themselves mired in crushing debt, suffering with credit scores that were hammered for up to ¾ of a decade, and forced to dig out of a deep financial hole for up to seven years after graduation. This is a time which should have been used to solidify their financial foundation rather than wasted years struggling to rebuild it.
We at Credit.com believe that Congress got it right. However, being the notoriously open-minded people we are, we decided to see what folks really thought. On January 14, 2011, at our behest, GfK conducted a poll asking whether someone under the age of 18 should be entitled to get a credit card on their own. The response was a resounding 88-12 against the concept. While I seriously doubt that too many credit card or banking executives were part of the sample, one might say the number speaks volumes. Hell, that is ever-so-slightly higher than the spread of the final score of the University of Wisconsin-Indiana University football game last fall (all due respect to Indiana).
No one was undecided – ditto, on "no opinion."
I don't believe that this new law is anti-kid. In fact, I believe it is very pro-Gen whatever. Of course, some young folks might believe that it is slightly unconstitutional for Congress to prohibit issuers from providing – either on or near campus–free slices of pizza, t-shirts, or Frisbees (to name a few goodies) as incentives to take an application. Ah well, there goes the food and/or apparel budget for the week!
But, it is not as if a young person is sentenced to the credit Gulag during this formative period of their financial lives without parole. It simply means they have to either step up personally and get a job or get a co-signer. One might argue that the former is best because when you work, you appreciate money more and are less inclined to spend irresponsibly. However, depending upon whom you recruit to co-sign and their perceived level of understanding if you hit the limit, fail to pay and put their credit in jeopardy, there might be the same chilling effect.