According to an article in the Dallas Morning News, credit card companies are already backing down from marketing to youth under 21 years old as the new Credit Card Act is set to become law in Spring 2010. The Credit Card Act will prohibit credit card companies from lending to anyone under 21 years old unless he/she has a co-signer or proof of their ability to make payments on the loan.
The article said:
“…unsolicited card offers will be prohibited to everyone under 21, and credit card companies can’t entice students into signing up for a credit card with any tangible item anywhere on or near a college campus or at a college-sponsored event.”
Also, Texas law now requires that the state’s colleges incorporate a credit education class into their new student orientation program. Many students who want credit cards may attempt to convince their parents to co-sign for the credit card; but parents should use extreme caution. If you co-sign for your child’s credit card, you will be fully liable for payments. That means if there are late payments or if your child defaults on their credit card obligations, your credit rating will be affected. Also, the credit card company can pursue you for payment.
And just in case you think that junior won’t mess up your credit, take a look at the statistics:
A recent study by Sallie Mae found the average credit card balance for college students has grown to $3,173.
84 percent of undergraduates this year have at least one credit card, up from 76 percent in 2004.
On average, students have 4.6 credit cards, and half of college students had four or more cards.
The average balance has grown to $3,173, higher than any of the previous studies.
Median debt has grown from 2004’s $946 to $1,645.
And because most of these students have not income, many of them end up filing for bankruptcy eventually. Just in case you were wondering, if you co-sign a credit card account and the primary user files bankruptcy, the credit card company can then come after you for payment. Please think twice before co-signing a credit card account for your child.