can college students still apply for credit cards?

August 4, 2009 · Filed Under Money

The credit card reform bill that President Obama signed back in May will make it more difficult for young adults to get a credit card. Beginning February 22, 2010, anyone under 21 years old who can’t demonstrate that they have an independent means of repaying debt will have to get a co-signer before they can get a credit card in their own name. On top of that, any attempt to contact people younger than 21 with unsolicited offers for credit cards will be banned.

But that’s not all! The bill also makes “gifts” that come along with a card illegal if it’s a signup on or near a college campus. That means no more free t-shirts or frisbees just for signing up for a credit card.

There are a few questions still to be asked: what will constitute the ability to repay? The Federal Reserve has to set those rules, and they could look at it several ways. If you’re 19 and a full-time student, for example, you may work part-time and look like you can’t repay a credit card. But you might also get income from parents or other sources on an irregular basis. Will it be enough to say that your parents would help you out if you couldn’t pay? Or will the government require credit card companies to collect W-2s and bank statement information?

Protecting young adults from too much credit card marketing is a good thing. But the earlier you establish a credit history the better; part of your FICO score is determined by how long you’ve been “in the system” with credit in your own name. If you are a parent of a young adult – or a young adult yourself – consider getting a credit card with a low limit now (maybe $500) and using it responsibly. Remember that you should never charge $20 if you only have $10 in the bank: spend less than you earn.