Under 21 And Want A Credit Card? Better Get Mommy’s Permission First

As mentioned before on this blog and pretty much everywhere else you look on the internet other than sites whose main attract consists of supposed “young teens,” the unemployment rate is at a 26-year high with a vast majority of those receiving employment benefits facing an imminent cut to their benefits come March.  Well, amidst these dire times it’s good to see that the government is finally trying to do something other than kill the public option or give unnecessary rights to corporations.

In case you haven’t been following the story, a new law has recently been passed which makes it more difficult for those under 21 to get a credit card.  (Note: I was originally planning to include a link at the end of my humorous opening sentence to really drive home my joke, but I decided against it because I didn’t want to add another tick to the unemployment rate).

Yes, college kids, parents of college kids, and everyone else under 21 years old, come February 22, 2010 the Credit Card Accountability, Responsibility and Disclosure Act or CARD Act comes into effect, which means if you’re not old enough to drink legally and you want to get a credit card, you better be ready to dance for it because it won’t nearly be as easy as just signing on the dotted line.

Among the newest and biggest changes for those under 21 looking to get a credit card is a requirement that they get an adult co-signer before a card will be issued.  Or if the under-aged person can’t get that, then they need to show they actually have the finances to support a credit card, meaning they need a job.  It also prohibits, among many other new regulations, credit card companies from offering goodies on college campuses (call “inducements”) like free iPods or clothes as gifts to students for signing up.  Also, companies will no longer be able to arbitrarily raise interest rates without giving cardholders at least 45 days notice first.

Now this might not sound like much to cure the current credit crisis.  But in light of the unconscionably high fees and interest credit card companies have been gaining through the inexperience and irresponsibility of this young demographic, the CARD Act will do a lot to help reverse the growing economic crisis, stem America’s widening wealth disparity, and protect young credit cardholders.

However, the best part of the Act is that if the credit card companies violate it, then they are breaking the law!  This means consumers will finally have a relatively strong statutory basis to sue a deceptive credit card company and actually have a better chance at winning.  In the past, if consumers wanted to sue they would normally have to do so under a claim of fraud; specifically they’d have to prove the credit card company actually committed it.  Fraud is a very high legal standard to establish, not to mention an incredibly expensive lawsuit to litigate (we’re talking six-figure lawyer fees).  So the Act will do a lot toward making these types of lawsuits easier and cheaper.

But it’s not all good news.  Because like all laws, for all the benefits that the Act brings there are a number of disadvantages, both new and old, that it will levy onto consumers.  For one thing, credit card companies will now likely claim higher operating cost due to having to adhere to the Act, which will probably translate to higher starting fees for opening a new card, giving less rewards to cardholders for spending, and issuing lower credit limits.  The Act also doesn’t prohibit credit companies from issuing cards with variable interest rates that increase after a set amount of time.

And one last thing that consumers should watch out for, the Act doesn’t apply retroactively.  Aside from the constitutional violations that a retroactive application of this statute would raise, it also means that cardholders who signed onto their card due to tactics used by credit card companies which the Act now prohibits cannot sue said credit card company for such past harm.  So if you were or feel as if you were screwed over in the past by a credit card company, well, you’re still screwed now.

But don’t worry.  At least any new credit card you open will be protected by the Act, as well as any card your future children get; assuming the Act isn’t repealed, that is…