NDSU Extension Service - Ramsey County


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Credit Cards for Young Adults

Credit Cards for Young Adults

            In 2008 a survey by United College Marketing Services found that college students received an average of 25 to 50 credit card solicitations per semester.  The survey also found that college seniors with at least one credit card graduated with an average of $4,138 in credit card debt in 2008.  Credit card balances of this magnitude may soon be a thing of the past, however. New credit card rules for young adults have been called “the end of credit as we know it.”

            There was a time, up until February 22, 2010, when college students and other young adults under age 21 were “easy targets” for credit card offers. In exchange for inexpensive freebies, such as T-shirts, pizza, hats, and highlighters, young adults were actively (and often aggressively!) sought after to sign up for credit cards. “Plastic for pizza” (or some other incentive) was widely practiced. Not anymore. As a result of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 there are strict rules on the marketing and issuing of credit cards to young adults.

            Changes that benefit young adults include:

• Credit card companies are prohibited from offering free merchandise to college students in exchange for applying for a credit card. This rule is in effect on or near a college campus and at college-sponsored activities such as concerts, homecoming rallies, and athletic events.

• Credit card issuers and universities must disclose agreements  with respect to the marketing of credit cards to students and corresponding financial compensation practices.

• Prescreened credit card offers to young adults are limited through the use of birth dates in credit reports.

• Credit card issuers are prohibited from issuing credit cards to people under age 21 unless applicants have a co-signer or can prove that they can afford to make payments (i.e., have a verifiable annual gross income). The co-signer can be a parent, legal guardian, spouse, or any other individual age 21 or older having the means to repay a young credit card applicant’s debts.

• Young adults are limited in the amount of credit they can receive. Even if a young adult does qualify to receive a credit card by having a means to repay debts, the amount of credit that can be extended is capped. The maximum amount that a young adult, for whom no one else assumes joint liability, can charge on one credit card is limited to the greater of $500 or 20% of the student’s annual gross income in the most recently completed calendar year.

            The bottom line is that credit cards are now more difficult to obtain than they were in the past and the amount that can be charged is limited. Time will tell if age restrictions on credit cards have positive long-term effects.


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