Credit CARD Act and Its Affect on College Students

According to a 2009 study by Sallie Mae, the average credit card balance for college students was $3,173.

Only 15% of college freshman surveyed had a zero balance.

Of overall students, 82% carried a balance and had monthly interest charges.  The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 put new rules in place to help consumers better understand their credit cards and cut down on unfair practices from credit card companies.  Of those rules, there are some that college students should be especially aware of.

Here is a rundown of the CARD Act and its affect on college students:

Proof of Income

Students under 21 need to show proof of income in order to get a credit card on their own.  This can come from jobs held, proof of income from investments, or a savings balance that significant enough to pay off credit charges.

Those students that can’t prove income would need a co-signor in order to get a credit card.  This means that if the student doesn’t pay, the co-signor (usually a parent) becomes responsible for the debt.  If a student with a cosigned card needs a credit increase, the card company will need permission from the co-signor first (this is pretty reasonable sine the co-signor is ultimately responsible for the debt).

No More Free Gifts

Credit companies are well-known to give out gifts on campus to get students to sign up for credit cards.

Everything from t-shirts to frisbees to backpacks and more have been given out (I personally signed up for a card to get a Koosh ball).  Under the CARD Act, credit card issuers are no longer allowed to entice students to sign up for a credit card with free gifts on campus or within 1000 feet of campus.


Card companies can’t advertise on campus or within 1000 feet of campus with permission from the college.

Better Disclosure

There will be better disclosure from colleges and card companies about relationships they have about advertising on campus.  [What, you thought those card companies were allowed on campus for nothing?]

How Credit Cards Companies Are Reacting

Sample Credit Card

There are new rules regarding credit cards for college students you should be aware of.

With these new rules in place, credit card companies are working on new ways to make up for lost profits.  Here are some of the things being done:

– Credit card companies may still hand out free stuff.  The rules are that a card company can’t give out free gifts and accept applications on location.  So what some companies may do is continue handing free gifts but only give out information and applications for their cards without taking the applications. [source: SmartMoney]

– More aggressively market to younger demographics on sites like Twitter and Facebook.

– Appeal to parents to get cards for their kids.  Some companies will market credit card offers directly to the parents who are existing customers.

Drawbacks to the New Rules

For those students who would be responsible with a credit card, they are prevented from starting the clock on their credit history (length of credit being one of the factors of a credit score).  This could affect the interest rates some students will get for things likes cars or even homes when they are out of college.

Also, some students will lose out on the convenience of having a credit card while at college.  It’s not always practical to pay with cash or a debit card.

Are the New Rules Helpful or Fair?

Consider that a college student can vote at 18, join the armed forces at 18, and even drink in some states at 18.  But to get a credit card on their own they need to be 21 or prove income.  What the rules are basically saying is that a majority of students aren’t responsible enough for a credit card.

Evidence though, shows that college students tend to carry a credit card balance over $3000.  The CARD Act is a case where the few who are responsible are sacrificed for those who aren’t.

What do you think of how the CARD Act affects college students?  Are the new rules reasonable or do they go too far?

Free Newsletter to Keep you Free From Broke!Name: Email: We respect your email privacyPowered by AWeber email marketing
Published or updated October 21, 2013.


  1. I think the new rules are very reasonable and designed to prevent younger generation from getting in debt.
    My son got a credit card when he was 18 years old and maxed it out within a short peiod of time. He is still trying to pay it off at 22.
    Nowadays, you can not get a credit card on your own unless you are 21. The rule of thumb: if you don’t have cash to pay for it, don’t borrow and pay later with 21% interest.
    This will help kids to stay away from debt.
    Thanks for your great article! Very useful information!

    • I think the odds of coming out of college with credit card debt have been pretty high. We’ll see how these new rules change things a few years down the line.

  2. I think that the rules are very unfair for both college students and card companies. I got my first card at 18 and used it very responsibly. Also, it is not the card company’s fault if someone doesn’t use their card responsibly.

    • It’s not the credit card’s fault unless their terms are so muddled and hard to understand that a person doesn’t know them. For those who are responsible, it is unfair. An adult. which is what an 18 year old is, should be able to get a credit card. Then again, if they can’t prove income then how will they be paying it off?

  3. I fundamentally don’t believe in a nanny state! This law is too restrictive on people who are allowed to vote. I am a big believer in personal responsibilitiy and teaching my kids the same. How can I do that effectively if they aren’t allowed to try? I think failure is important for learning, even when extremely painful.

    A better use of government intervention on personal finance would be required education in high school for things like budgeting, understanding what stocks are, mutual funds, etc. Government limiting people’s access to a legal product/service is limiting one’s rights and freedom.

    • I have to say you make a great point Mike! There definitely needs to be more personal finance education in both high school and college. And I agree that adults needs to learn to fend themselves and like you say, a little failure to overcome can be a good thing.

  4. beautiful and healthy says:

    i think cards should not be issued unless you have a job i knew one of my student friend who is highly indebted and is paying his fee to bank than paying it to college it is disastrous.

  5. When a young adult of 18 gets a credit card, can you specify the amount of maximun credit on the card (300.00) and should he/she max out the card every month if affordable and pay it off every month to increase the credit score ?

    • I’d say if there is a co-signor then the co-signor would have a say in the credit limit. Of course it’s the credit card company that sets the max. The option would be to lower it.

      Maxing the card out and paying it off is risky because you can’t be sure of when the card company reports to the credit bureaus. If they report before you have paid the card off then your credit utilization will be very high and that would hurt your score. You would be better to have a small amount on the card paid off every month.

What Do You Think?