Experts say new credit card law won't affect students significantly

Effective last Monday, the Credit Card Accountability, Responsibility and Disclosure Act aims to increase consumer protection by imposing a variety of regulations on credit card companies. As part of the act, individuals under 21 years of age seeking to open a credit card account need a cosigner or the ability to prove sufficient assets for repayment.

Experts suggest the law won’t significantly affect most students, other than to make them more attuned to their spending habits.

Eighty-four percent of college undergraduates had at least one credit card in 2008, according to the Associated Press.

Over the past year, there has been a tightening of standards for creditors as companies have become more “judicious” about giving out credit, Statistics professor Robert Stine said.

For example, companies have been monitoring with greater care how much credit they dole out, often lowering the limit on opening accounts.

Requiring a cosigner might make students monitor their purchases more carefully, although it may cushion worries about defaulting if students know they are backed up by their parents, Stine said.

“Most undergrads are yoked to their parents,” said Marketing professor Stephen Hoch, explaining that finding a cosigner should not affect many students. He added that debit is still a viable alternative.

Engineering freshman Karen Hu, who does not have a credit card, said while the act does not pose problems for her personally, she could see how it might disproportionately affect individuals with loose ties to their families or who have parents with bad credit histories.

Current credit card holders can expect the law to transform their statements as well. Statements will be issued regularly and will include budgeting figures such as the minimum payment needed to clear a balance within three years.

“Fine print is always sort of a slimy thing,” said Hoch, adding that it “ends up catching people who are usually a little more vulnerable for one reason or another.”

Despite increased protection for consumers, some credit card companies have made changes in past months to mitigate the impact of the new regulations — including raising interest rates, introducing new fees and reviving annual fees.

Stine said credit card interest rates used to mirror the prime interest rate, the rate at which banks loan money to customers with high credit ratings. But as a result of the financial crisis, he said, credit card rates have gone up while the prime rate has dropped.

Yi Su, a graduate student from China in the School of Engineering and Applied Science, explained that even before the law passed, she would need a job and a Social Security number to apply for a credit card in the U.S. She uses her international card instead.

College sophomore Alexandra Hursh opened an account when she first came to Penn in 2008.

Hursh has never missed a payment, but acknowledged the potential dangers of credit. Her starting limit of $500 has grown tenfold in less than two years, but she said she uses her card mainly for small purchases to build a strong credit history.

“That’s a lot of power to have at our age,” she said, adding that it is difficult to appreciate the value of money “when you’re not handing over dollar bills.”

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