Credit C.A.R.D. Act adds new restrictions for youth

The Credit Card Accountability Responsibility and Disclosure Act, or the Credit C.A.R.D. Act, was passed during spring of last year to ease consumers from the sometimes predatory and misleading practices of credit card companies.

The act, which will affect all credit card owners but have some rules that specifically target young people, is one of several recent reform efforts by the Obama Administration.

"For too long, credit card companies have had free rein to employ deceptive, unfair tactics that hit responsible consumers with unreasonable costs," President Barack Obama said in a statement to the press on Tuesday. "But today, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable."

These new rules, which went into effect Tuesday, prevent credit card companies from arbitrarily increasing interest rates and guarantee that 45 days notice are given to cardholders every time rates are increased. A number of other rules enacted include protecting customers who pay on time, protecting cardholders from excessive fees and preventing card companies from using misleading terms.

Cardholders will also have the ability to set their own fixed credit limit, giving them greater ability to budget their money. The law also demands that credit companies explain minimum payments, an attempt to curtail the trend of cardholders only making minimum payments without paying attention to the interest rate, thereby accumulating massive debts.

And, because more young adults are finding themselves burdened by credit card debt, those under the age of 21 must have a co-signer (over the age of 21) to their cards, unless they can prove that they have the income sufficient for making monthly payments. If they want to increase their credit limit, they must have the permission of the co-signer.

"It's tougher to get your career started on a good foot if you're carrying a large, pressing debt," said Jared Bernstein, senior economic advisor to the vice president, in a conference call on Tuesday. "Secondly, you can do considerable damage to your credit score and that hurts you moving forward as you begin life and want to make the investments that families make when they get older."

"It's not a bad idea," sophomore Chris Mateer said. "21 is a pretty reasonable age, and gives the parents more control over their kids' spending."

The law also recommends that colleges should make an effort to educate students about credit cards and offer debt counseling sessions as a part of orientation programs.

"I think it's a fantastic idea, because tons of students don't understand how credit cards work and how they can themselves into debt," senior Mark Smith said.

There has been expression of concern from members of the American Bankers Association such as Kenneth Clayton, senior vice president and general council member. While consumers may be more protected, the policies could have the adverse effect of causing interest rates to rise greatly following the loss of their now-underage customers. Also, if payments are late by more than 60 days, credit card companies can increase their rates with no federal cap. Closely reading notices received from credit card companies is highly recommended to prevent new interest rates and rule changes from going unnoticed.

"The idea here is to help make sure that responsible practices dominate, especially with young people, because the costs of this are really high," Bernstein said.

For more information about the Credit C.A.R.D. Act and for help with financial management, visit