It’s no secret that college student have long been the target of credit card companies. Pre-approved credit cards and “you deserve it” enticements worked for these companies for years. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 held some intended consumer protections for college students.
The Credit CARD Act Basics:
It’s a myth that the CARD Act restricted credit card companies from marketing their wares to college students on campus. Many students and parents alike may not realize that this is big business not just for issuers but for colleges and universities as well. Colleges have long received payments for the opportunity to market to students and even alumnus list.
There were “suggestions” and “restrictions” that simply involved notify colleges about marketing near campuses in the Act related to protecting college students. Companies could no longer offer “tangibles” better known as “freebies” to students who sign up for a card. Some people mistakenly believed this act issuers off of college campuses. That’s not true. They can be there, culling for those students who are over 21, have a steady income or a co-signer, they just can’t offer anyone a free t-shirt or pizza.
Beverly Blair Herzog of Credit.com writes, “I’m actually in favor of college students learning how to use credit cards under the guidance of a responsible adult. I just don’t want a stranger on a campus giving my kid gifts in exchange for signing on the dotted line.”
Those responsible adults Herzog refers to do come in to play with the Credit CARD Act because issuers are no longer able to give cards to applicants under 21 that don’t have a proven income to pay the charges without a co-signer. In most cases, that means the parents. While math courses abound on college campuses, in many cases it’s left to dear old mom and dad to teach Credit Smarts 101.
Here are 5 Consumer Protection Tips to Teach Your College Student:
Beverly Blair Herzog, a finance writer once who was once wooed into debt by credit offers, offers the first two.
1. “Think Twice Before You Sign: When you spend a little more money than you have, you end up carrying an outstanding balance. And the companies charge you interest on that balance, over and over again, every month.”
2. Herzog also says, “Don’t Charge Tuition: In a 2009 Sallie Mae study, 30 percent of students were using credit to pay for tuition, which is a very expensive way to pay for college. If your family is tempted to use this option to finance college costs, CPAs urge you to research much less expensive student loan opportunities.”
Some more sage advice for all ages that needs to reach college students.
3. Balance your checkbook. It seems obvious from Civics 101 but research has shown that over a third of college students rarely balance their statements and or checking account balances. This is an important life skill every college student needs to make a habit now.
4. Create a budget. Students can be so creative but when it comes to creating a budget they just don’t have a lot of real life experience. College students, and parents who are footing the bill should be able to tell what money is going to the bookstore and what money is going to the bar.
5. Don’t throw your credit in the trash.
Whether or not a student has credit card, issuers will still be sending offer letters. While the Credit CARD Act may have deterred marketing strategies on campus, direct marketing, like life, still happens. A bird in hand may be worth two in the bush but a credit card application or worse those blank checks from the credit card companies can be like a fat cat to identity thieves, hackers and credit needy scammers.
How credit smart is your college student? Do you have tips to share with other parents or college students?