Bankers Say in February Credit Will be Difficult to Obtain for Consumers Under 21

The credit card law that goes into effect in February, the CARD Act, will make it very difficult for many adults under the age of 21 to obtain a credit card without a parent co-signer or proof of their own income, the American Bankers Association (ABA) said in a statement on Tuesday.

“The new credit restrictions will only be effective if education bridges the gap. Otherwise, first-time credit users will be older, but not necessarily wiser,” explains Laura Fisher, ABA Education Foundation director. “Both the parent and the child should understand the privileges, and possibly the pitfalls that come with credit cards.”

The ABA offers these tips to young consumers and their parents to educate themselves about the use of credit, and the responsibilities that come with using a credit card:

To young adults
"Know the power of credit" and use credit wisely to build a good credit history. Understand the terms, conditions, grace periods, annual fees, and interest rates involved in using your credit card, and read the fine print and understand that your credit application is a legally binding contract. Pay at least the minimum payment to avoid penalty fees and rising interest rates, but pay more than the minimum payment to reduce your balance quicker.

To parent co-signers
Understand that while you will not have access to your child's account statements without their permission, you will still be responsible for paying the balance if they default on the account. Educate your child on the use of credit before co-signing for the card; make sure they understand how to read credit card statements and things like APR and grace periods, that they know what to look for in their credit report, and that they understand how to use credit responsibly. And finally, set a good example for your child to follow, such as paying your own bills on time, being careful about spending money, and saving regularly.

Friday, October 15th is the seventh annual Get Smart About Credit Day. Participating banks - 3,000 of them - will educate students with lessons on developing good credit habits like making timely payments, the smart use of credit, and only borrowing what you are able to repay.

For a list of banks in your area that are participating in Get Smart About Credit Day, go to the ABA's List of participating bankers.


Source:
American Bankers Association