Credit CARD Act of 2009 Restricts Credit for Students

by Broke Grad on August 4, 2009

This is a guest post by Joshua Heckathorn, who runs and holds an MBA and B.S. in Finance. Creditnet is a free resource for anyone who wants to learn more about credit and compare hundreds of credit cards online. When Josh isn’t glued to the screen of his Mac, you’re bound to find him at the nearest rock-climbing wall or sushi joint around Seattle.

The new rules of credit have once again ignited controversy around when one is considered a legal adult in the United States. Is it 18 or 21? We just can’t seem to make up our mind.

Yes, you can buy cigarettes and even choose to defend your country at age 18, but according to the new rules, you’re not mature enough to decide whether you can handle the responsibilities of credit. Does that seem fair? Perhaps not, but supporters of the legislation argue that young adults, whether they like it or not, need greater protection to help them avoid falling into massive amounts of debt prior to graduation.

According to SallieMae, the average college senior with at least one credit card graduated with $4,138 in credit card debt in 2008. That’s more than a 40% increase since their previous study was completed in 2004, and 2009 will likely be worse as tuition expenses soar and other lending sources remain in a deep freeze.

The rise in student credit card debt is clearly a problem, but many people aren’t convinced the new rules of credit will actually solve the underlying issue – a lack of financial education among young adults. That’s a tough issue to solve, and in my opinion it must first be tackled by those responsible for raising our nation’s youth – parents and legal guardians. But that’s an entirely different article. For the time being, we’ll just have to make due with what our elected officials have given us.

So, let’s quickly review what you need to know about this new law. Signed on May 22nd, the Credit Card Act of 2009 essentially bans credit cards for people under 21 unless they have adult cosigners or can prove they have sufficient income to support the level of credit given. No one really knows what “sufficient” income means yet, but you can expect to hear more details on this before the law takes full effect in February 2010. The bottom line is if you don’t have a credit card by next February, you’ll have to either beg for mom or dad’s signature or prove you have a job that provides enough income to support a revolving credit line.

In addition, you won’t have to sift through dozens of prescreened credit card offers in your mailbox anymore. Credit issuers are banned from sending them to anyone under 21. And there’s no need to worry about getting an unexpected credit card in the mail after signing up for a free pizza during student orientation. Giving away any type of “freebie” for credit card applications at a college-sponsored event is also banned.

While the Credit Card Act has certainly brought about some much needed changes to protect young consumers from predatory-lending practices, it’s difficult to comprehend how restricting credit for those under 21 will address the underlying issue of financial education. Parents who already foot students’ tuition and credit card bills will likely just cosign for new credit cards and continue paying the bills. Will any of these students learn more about how to manage credit wisely? Very few.

On the other hand, responsible students who are working hard to put themselves through school without parental support might discover they have no access to credit when they need it most. Of course, no credit means no credit score, which will make their lives even more difficult as they enter the real world and need to rely on their credit score to finance a car, home, or even a graduate education.

What do you think of the Credit Card Act? Do you believe the age restriction on credit will have positive long-term effects?

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{ 38 comments… read them below or add one }

1 auto phi August 4, 2009 at 5:37 pm

I think it’s up to the individual person to be responsible enough to take care of their own finances. Don’t blame it on “financial education” for kids. People know damn well if they have money in the bank when they’re buying something in credit.

And for those who can’t control themselves, they’ll suffer the consequences, but don’t restrict otherwise capable adults from building credit while young. This America holding people’s hands crap has to end.

2 Joshua Heckathorn August 7, 2009 at 11:30 am

I agree, the handholding is ridiculous. There’s absolutely no reason why young adults should be restricted from taking the initiative to build their credit.

Also, while it’s true that people may know how much money they have in the bank, I’m constantly amazed at how little young adults understand about credit cards. 99% of the time it’s because their parents never exposed them to credit at a younger age or taught them any personal financial skills whatsoever.

It’s sad, but many individuals, no matter how smart they are, need someone else to help them learn how to take care of financial matters. Those who receive that help when they are young, are generally in much better financial shape by their early twenties.

3 used rv for sale August 18, 2009 at 7:46 am

However, if you’re only going to use your credit card in foreign countries occasionally, then your biggest concern should be to avoid the typical 3% foreign exchange fee when using your credit card outside the U.S.

4 used rv for sale August 18, 2009 at 7:50 am

Simple really young people are the ones most likely to not read the terms and conditions for the card and are the most likely to run up high balances and incur late fees, over the limit fees and paying the maximum amount of interest. It also starts a long time association with depending on credit cards to live.

5 Ibrahim | August 24, 2009 at 7:56 pm

I can’t believe I’m so far out of the loop. I wasn’t even aware that this existed. Thanks for outlining it for us!

6 Joshua Heckathorn @ Creditnet August 26, 2009 at 11:50 am

You’re welcome…glad you enjoyed the article.

Keep a close eye on what happens over the next 6 months as the credit issuers try to figure out how they will work within the new rules. We’re likely to see more changes that may directly affect your ability to secure new credit.

7 Kate Thome September 15, 2009 at 3:49 pm

Finally, someone is looking at it from the student’s perspective! Please see my post on The issue is that by making it harder for banks to issue credit cards to people under 21, it will become too much of a hassle and they won’t bother to do it except in limited circumstances. Another problem that I have with the concept is this… If a 19-year-old truck driver applies for a card, he has a steady source of income. If another 19-year-old has chosen to go to college, better himself AND potentially earn MUCH more over the course of his lifetime, he can’t have a credit card. Makes that whole Obama stay-in-school message pretty ironic doesn’t it?

8 Joshua Heckathorn @ Creditnet September 15, 2009 at 11:36 pm

I agree Kate…the new rules are discriminatory, whichever way you choose to look at them.

9 used rv for sale October 8, 2009 at 6:32 am

In general, the best way to use a credit card is to funnel your normal spending through it for the rewards and then pay it off in full each month. If that was your plan, then I’d suggest whichever student rewards credit card will pay you the most for your normal spending profile.

10 Joshua Heckathorn @ Creditnet November 8, 2009 at 8:27 pm

I like to call it your credit “GPA”. Get some credit (preferably no annual fee), Pay in Full, and Always live within your means.

11 used rv for sale December 3, 2009 at 6:54 am

The credit card company won’t know you’re planning to leave the country! Even if they did know, they can’t stop you, unless they first sue you and get a court order saying you can’t leave.

12 Lisa @ February 10, 2010 at 9:44 pm

One of the few credit cards still charging 0% for foreign transactions is Capital One. Other cards may offer 0% for their “premier” members; in other words, pay a high annual fee and you’ll save the 3% normally charged on transactions made outside the US. But Capital One still waives this fee for their cardholders, even students. Feel free to visit our credit cards section at to read reviews and details of student cards, such as those offered by Capital One.

13 business data management February 24, 2010 at 10:44 pm

These credit-card measures look good on first blush. I am wondering what kind of pressure this will create for “talented” bank executives. And how the large banks will attempt to pass higher fees on traditional checking and savings accounts, or otherwise, weasel into a new predatory practice, under care and lazy eyes of the FDIC and Treasure Department.

14 business data management March 3, 2010 at 3:25 am

You obviously put a lot of work into that post and it’s very interesting to see the thought process that you went through to come up with those conclusion. Really interesting and informative article, keep posting. Nice work, thanks for such information.

15 business data management April 7, 2010 at 10:50 pm

Oh, the Swiss are taking a stand. There’s a first time for everything. Actually, it sounds more like they are shriveling up and going into hiding.

16 PHP Tutorial May 7, 2010 at 7:04 am

All of the major banks providing credit cards have gotten away with reaping profits.

17 wordpress seo May 20, 2010 at 4:00 pm

im not paying for it for like 2 years,would the credit card compay would hold me? or would they file legal case against me because of my credit card and wouldnt able to go out of the country?was this happening due to credit card problems?

18 Evden eve June 1, 2010 at 5:08 pm

This America holding people’s hands crap has to end.

19 web marketing June 4, 2010 at 9:07 pm

In basic, the top approach to use a bank card is always to funnel your regular paying through it for the rewards after which shell out it off in total every month. If that was your plan, then I’d recommend whichever student rewards credit card will pay you probably the most for the standard shelling out profile.

20 web marketing June 4, 2010 at 9:07 pm

In common, the best method to use a bank card is usually to funnel your usual paying by means of it for your rewards after which it pay it off in full each and every month. If that was your program, then I’d suggest whichever student rewards bank card will shell out you the most for your regular wasting profile.

21 Josh Heckathorn @ September 14, 2010 at 9:49 am

Hey Samurai- check out the Citi Forward credit card or the Citi MTVu card for college students. Both are great options. You can read our reviews and apply securely online at

22 turkey toursl October 7, 2010 at 9:28 am

Keep up the good and hard work! Thanks ;))

23 sismelek February 1, 2011 at 7:22 am

Oh, the Swiss are taking a stand. :/

24 maurteks February 1, 2011 at 7:24 am

All of the major banks providing credit cards have gotten away with reaping profits. (:

25 extralik February 1, 2011 at 7:28 am

You obviously put a lot of work into that post (;

26 ertarok February 1, 2011 at 7:30 am

These credit-card measures look good on first blush. ;)

27 mohsin ali February 14, 2011 at 1:55 am


28 çatlak kremi February 23, 2011 at 4:29 am

Keep up the good and hard work ;)

29 maurers March 19, 2011 at 12:03 pm

In general, the best way to use a credit card is to funnel your normal spending through it for the rewards and then pay it off in full each month. .!

30 gogus buyutucu April 13, 2011 at 4:48 am

You obviously put a lot of work into that post ;)

31 zayiflamayontemlerim May 6, 2011 at 2:10 pm

Oh, the Swiss are taking a stand ;)))

32 rent textbooks online August 15, 2011 at 10:22 am

I almost think they are right in trying to protect peoples credit until they are old enough to really get it.

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