Credit Cards for Students

Students have always been a target market for credit card providers.  This is because there is a belief that it is at university, that many people develop life long brand loyalties. Younger people also tend to be less suspicious about debt.

The Credit Card Act of 2009 put new limits on issuing credit cards to students and people under the age of 21.  Among these limits was a requirement that credit cards are not issued to borrowers under the age of 21 unless the borrower has a co-signatory or can prove that they can repay any loans independently.  Although some balances will be available for students living at home with steady work, for most students under 21 this will mean that they need a co-signatory, in most cases a parent.  In either case this will need a good and trusting relationship with parents.

In many cases students do not notice much difference when parents are co-signatories.  There is often  a greater desire from parents to have a lower credit limit, at least until the student has demonstrated their maturity with money. However, most parents also have a greater awareness of the importance of interest rates and repayment terms than new borrowers do.

There have been a number of marketing restrictions placed in the 2009 Credit Card Act.  Gifts for signing up to credit cards on a university campus were outlawed in the Credit Card Act.  The Act has also required universities and alumni associations to disclose marketing relationships with credit card providers.  There is a voluntary code of conduct recommended by Congress that goes further, with card companies required to notify where they are offering cards, limiting locations where cards can be marketed and making classes in debt education a mandatory part of freshman orientation.

Students under the age of 21 may have to look at alternative ways to build up a credit history.  Credit histories have never just affected debt, they also affect areas such as obtaining insurance, being approved for certain payment plans and job offers.

Some prepaid cards offer the ability to build up a credit history and do not need fall under the ban on independent credit cards for students as they already show an independent ability to pay off the card.  Parents or other relatives who are uneasy about signing for unsecured credit cards for a young person may be more willing to sign for secured credit cards which are guaranteed by a cash bond deposited with the provider.  Unlike a straight cash gift these build up a credit record as well as limiting the parent’s potential loss.