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New laws restrict students' credit card access

New credit card laws went into effect last week that put restrictions on both credit card companies’ interest rates and college students’ ability to apply for credit cards.

The Credit Card Accountability, Responsibility and Disclosure Act, or the CARD Act, for short, requires all people under the age of 21 seeking to get a credit card to have a co-signer over 21 or show proof of income. The act brings an end to incentive gifts and requires schools and credit card companies to disclose any terms of marketing or promotional agreements, CreditCards.com reported. The act also encourages schools to restrict the number of companies they allow on campus and to offer sessions on finances and debt as part of student orientations.

Although several things are not affected by the CARD Act, the new regulations prevent credit card companies from raising interest rates on existing balances, prohibit fees on exceeding card limits and require companies to give notice 45-days ahead of any changes.

“For too long, credit card companies have had free rein to employ deceptive, unfair tactics that hit responsible consumers with unreasonable costs,” President Obama said in a Feb. 22 statement. “But today, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable.”

Since Obama signed the act into law last spring, however, some consumers have already lost the power the act intends to give. Phil Woodward, associate professor of business, said his credit card company hiked his interest rate after the law passed, and many other companies have done the same.

“It’s good to protect us from ourselves, but you lose some freedom,” he said. “It’s a double-edged sword. And when they’re trying to stimulate the economy, it’s not the best way to stimulate the economy.”

Senior Jonathan Enns, 21, said he believes that, despite credit card company efforts to find loop holes in the new laws, the laws will ultimately help consumers if the companies and the government stick to the new laws. The laws will limit the number of students using credit cards to those who will actually utilize the cards, he said.

Freshman Nicole Amstutz, 19, said she thought the laws would help decrease the number of students she read about in magazines who went deep into debt because they had spent money they didn’t have.

“A lot of college students say I can get this card and this card, and then get in debt,” Amstutz said. “Students think they’ll spend $100 and pay $100, but they don’t know about the interest and have to pay $125. There’s always going to be someone stupid.”

Amstutz, who has two credit cards, said her parents taught her to only spend money she has. It’s a person’s responsibility to watch spending, she said.

Sophomore Josh Kaye, 20, agreed. Kaye keeps one credit card for emergencies and believes people need to be aware of the consequences of overspending.

“By the time people get to college, they should be responsible,” Enns said. “Parents teach you up to a point, but by college you’re on your own. The responsibility lies on you to keep yourself in check.”

Woodward recommended students avoid using credit cards and, instead, pay cash. People should always try to save for a rainy day, he said.

“These new rules don’t absolve consumers of their obligation to pay their bills,” Obama said in his statement, “but they finally level the playing field so that every family and small business using a credit card has the information they need to make responsible financial decisions.”

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