It is so incredibly easy to apply for a credit card. Companies set up booths during move-in-days at college dorms, send out applications in the mail, and bombard email inboxes with credit card offers. Many credit card companies offer incentives, like a free T-shirt or a free pizza, to those who apply and are approved for a card. This all sounds like a good deal for students; sign up for a Visa and dinner is free! However, a few months later, you open your credit statement and find you owe way more than you are able to pay back. Then, your interest rate goes up and your credit score goes down.
Why is your credit score important? If you have a low credit score, you might not be able to buy a car, rent an apartment, or even get a job.
“As much as students are obsessed with GPAs, your credit score is the most important number you’re going to have to deal with [after graduation].” says Adam Levin, founder of Credit.com.
Last week, President Obama signed a bill that will make it illegal for credit card companies to give anyone under the age of 21 a credit card, unless that person has a parent co-sign or can prove they can make the payments themselves. The co-signer will also be held accountable for paying off the credit card.
“If Junior has to come to Mom and Dad and say, ‘Will you co-sign?’ then Mom and Dad can have a talk with Junior about credit cards,” said Bill Hardekopf, CEO of LowCards.com.
In a recent survey by Sallie Mae, the students who are the most likely to rack up large credit card debts are those who are the least informed. Hopefully, these new reforms to the credit card industry will force parents and children to talk more about responsible credit card habits.
“Even though credit is an individual exercise, when you’re a member of a family, it’s like a team sport,” said Levin. “We all have a stake in making sure our children start the right way and understand as best they can the system and the way it works.”
Hopefully, these new reforms will stop our generation from incurring a large debt that we are unable to pay off.