Posted By Mark Scarp

By CHRISTIE ROSHAU SABEW/NEFE Fellow Arizona State University

For students who are unaware, a new federal law that deals with credit cards called  the Credit Card Accountability, Responsibility and Disclosure Act  (or the CARD Act) of 2009, became effective in February. Part of it is directed to young consumers such as ourselves. Here is a brief overview that I found regarding it that directly affects college students and others who are younger than 21 (www.govtrack.us):

• It prohibits extensions of credit to consumers younger than 21, unless the consumer has submitted a written application signed by a co-signer (such as a parent, legal guardian, spouse who will repay the debts in relation to the account created).
• Requires approval by the co-signer for increases in credit lines.
• Limits card marketing on campuses with giveaways such as T-shirts and pizza.

As a student myself, I may be stepping on a few peers’ toes when saying that this kind of limitation to young adults could be a healthy decision. It will keep those younger than 21 from getting a credit card just to get one, or from potentially using it irresponsibly.

I also understand and agree this could be damaging for those between the ages of 18 and 21. Those in that age range that are now trying to apply for a credit card have limitations that weren’t there before. This could make some believe that their responsibility to make decisions on their own as an adult are minimized or diminished. However, maybe our generation needs the guidance and approval from someone 21 or older in order to get a credit card to help with our decisions to why we need one in the first place; for both necessities, and pleasure.

The Brooklyn Eagle, a newspaper serving that borough of New York City, published an article about a recent trip Ridgewood Savings Bank took to high school students in Brooklyn, the Bronx, and in Nassau County, N.Y. As part of the, “Get Smart About Credit” national program, they offered these tips to the young adults about the use of credit cards, and I believe can be carried on to us in the collegiate level:

• Be extremely cautious when applying for a credit card. Read the fine print carefully.
• Comparison shop — compare rates and fees. All cards are not created equal, and in some cases they are not even similar.
• Pay close attention to “introductory” or “teaser” rates, as they may increase astronomically after the promotional period.
• Only use your card when you know that you can pay off the balance at the end of the month or if there is an emergency.
• Always make payments by their due dates and for more than the minimum amounts due.

Personally, I try to use my credit card when I know I can pay it off by time I get the bill (that last tip above). I plan out and see if the purchase I’m about to make is doable with my budget for that month. For example, I took a trip to California in January where I needed to use my credit card for the hotel and for tickets to an event I was attending. I knew I was going to be getting a set amount by the end of the January that would cover my expenses by time the bill was due, even though at the time of the purchase, I did not physically have it yet. Same goes with my book purchases for school. I’ve purchased them in the past with a credit card, knowing that my scholarship money would be coming to be able to cover that cost once the bill came.

Whether or not you agree with this new law and its particular affect to young adults, it is good advice to look over the tips above and apply them to the way you use your credit card. Avoid abusing your use of a credit card, which is a trap we can all be guilty of getting ourselves into if we are not careful.

Is it just for a new top that you’ve been wanting to get, but aren’t sure if you’ll be able to cover that price tag number when the bill comes? Is it for that new video game system that you and your buddies have been telling you to get for the past three months, but you know you won’t get money coming in…and it will be three times the original price by time you get it paid off? …just some things to consider when making your future purchases.

Christie Roshau, a senior attending Arizona State University’s Walter Cronkite School of Journalism and Mass Communication, is SABEW’s National Endowment for Financial Education fellow. NEFE provided a grant to enable Christie to produce several columns during spring semester 2010 on the important subject of personal finance for college students.