Getting a credit card in college just got a little bit harder

Photo illustration by Matt Wallach

Little black dress: $60. Taxi to and from South Beach: $80. Two drinks at Heathrow: $50. Graduating college without credit card debt: Priceless.

Are you willing to give up the plastic and kiss the old “buy now, pay later” trick goodbye? Starting Feb. 22 some people may have to, at least until they turn 21.

The new Credit Card Accountability, Responsibility and Disclosure Act (CARD) will prevent excessive rate increases, improve transparency among credit card companies, eliminate the confusing fine print and protect young people from getting in over their heads.

There’s just one issue for college students: new restrictions on who is eligible for credit could put many underage consumers out of the running.

Applicants will be required to have a cosigner before they can be approved, something for which many parents in today’s economy may be unwilling or unable to take responsibility. They’ll be forced to prove how they’ll be paying any balance beforehand, and any credit line increases must be approved by the cosigner who must remain involved in the continuous management of their finances.

Morgan’s company offers a solution. For those whose dreams of owning a credit card have been crushed, there is the prepaid card plan. These cards are reloadable and have a previously determined amount of money on them, which is paid before use.

“Reloadable prepaid cards are like having a bank in your pocket,” Morgan said.

Money can be added to the card through direct deposit by an employer, bank to card by a family member or at a load location. The card can be used wherever the brand (Visa, MasterCard or Discover) is accepted. It can be used for anything credit or debit cards are used for such as retail purchases, services, online shopping, paying bills or taking out cash. The limits are set by the issuer.

Many people have chosen to use a prepaid card regardless to avoid opening a bank account, which is required for a credit or debit card. With this new act it is predicted that transactions on reloadable prepaid cards will reach $12 billion in 2010.

Morgan advises consumers interested in getting a prepaid card to compare card offerings.

“Free is not always free,” she said. “Some companies say ‘no monthly fee’ but they charge $1 per transaction which adds up very quickly.”

Morgan said the key is to look for a low purchase price, a low monthly fee, free customer service and easy access to a live agent.

“If you have a question about your money, you want help as quickly as possible,” she said.

Supporters of the act believe today’s youth, and tomorrow’s economy, can use all the help they can get. Considering the steep costs of graduate schools and the difficulties many new graduates will encounter when trying to find jobs, debt accrued during college from careless spending could cause serious long-term problems.

“Credit card companies thought of many tricks to nickel and dime a huge number of customers, thus creating higher profits for their companies,” UM political science professor Sylvia Thompson said. “They should have dealt with their customers fairly. They didn’t. This new law will force credit card companies to be more honest and fair in their treatment of customers.”

Still, Thompson believes that college students need to be responsible to protect their future.

“College students should have to prove they have income to get a credit card,” he said. “Over the past decade many young people have graduated from college already burdened with a damaged record. This causes problems in getting credit in the future, when they can afford it.”

Some university students believe they are mature enough to handle a credit card without parental and governmental guidance.

“I have a job and know how much I’m going to be paid biweekly,” said Kristin Wright, an employee at the Wellness Center. “I only spend what I know I either have or will have. I have a job and know how much I’m going to be paid biweekly. I only spend what I know I either have or will have.”

Wright said she pays off her credit card every month.

“Too many young people end up paying hundreds of dollars of interest on a $15 late night pizza because they didn’t understand that the interest compounds rapidly and don’t have the resources to pay off the credit card,” UM Assistant Political Science Professor Christopher Mann said. “These credit card debts force many college students to make short-term decisions about graduate school and careers that may delay or divert them from what they really want to do.”

Nina Ruggiero may be contacted at nruggiero@themiamihurricane.com.