Credit Card Card Debt - College Students' Woes Relieved by New Credit Card Legislation, Not?
With credit debt of many college students growing and growing, President Obama recently passed a legislation that may help curb the problem. What is the impact from the new Credit Card Legislation? Can it really assistance to relieve the debt woes of the students?
An impact of the legislation is the tightening of credit open to college students. A full-time college student under age 21 can now only get a line of credit as much as 20% of his current income. Given the financial status on most college students, this greatly reduce the spending power they can get free from a credit card.
In order to access the entire limit, the new law requires an adult co-signer. Since the co-signer will probably be a parent, supervision over the card usage is actually expected. The bottom line is that there isn't any more easy credit to college students like it accustomed to.
The legislation helps protect the card balances of university students from worsening too. So long as a late payment is under 60 days, it prohibits an interest rate backpack. For a student card with co-signer, the additional mandate from the co-signer approving any interest rate increase adds another degree of protection.
Even when a student becomes delinquent and suffers an interest rate increase, he has a chance at redemption. By paying promptly for the next six months, he can regain the first lower rate.
You shouldn't under estimate the creativity of the credit card issuers to make up for lost revenues though. They may develop other fees not specifically forbidden in the laws. Maybe we'll start seeing fees for checking balance or participating in rewards programs. Who knows?
Creativeness asides, there is a more serious practice the brand new law does not address.
Have you ever wondered why college freshmen are now being bombarded by so many credit card offers? Because the schools sell their contact information to the credit card issuers.
Under the affinity card program, the colleges normally obtain a commission from the purchases made through the greeting card. The commission can come to millions a year and represents an excellent source of revenues to the colleges. Obviously then your schools have an incentive for students to acquire and make use of the affinity card. Since the new credit reform regulation doesn't forbid it, none of the schools will probably stop the practice any time soon.
While the new legislation misses the mark in some places, it is an improvement over the previous scenario. It eliminates certain contentious billing practices and limits easy credit. Both positive moves that will help relieve the woes of credit debt in college students.