Updated on 09.10.14

The Facts About Credit Cards For Teenagers

Trent Hamm

A reader recently pointed me towards an interesting article at MSN MoneyCentral on the topic of restricting the access that teenagers have to credit cards. Much of the article discusses the proposed Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (S. 414, sponsored by Chris Dodd, and often called the Credit CARD Act of 2009), which Weston summarizes as such:

The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 would forbid card issuers from opening accounts for people under 21 unless one of these criteria is met:
+ A parent, guardian or other responsible individual agrees to co-sign for the debt.
+ The applicant provides proof he or she can independently repay the debt.
+ Proof is provided that the applicant has completed a certified financial literacy course.

I understand where this bill is coming from and I agree with it in large part, but I would be opposed to it overall. Let’s look at both sides of the coin.

What I Like About the Bill
When I was a new college freshman, I signed up for a credit card in exchange for a t-shirt, then I began to use it for all kinds of stuff – video games and so on. In short, I acted like a fool with that credit card – a card I would have never had if this act had been in place.

A bill like this would unquestionably have kept me from getting into this early credit card debt. My parents would not have signed off on such a card and thus I would have been forced to learn how to manage the money from my part-time job more carefully, teaching me some valuable budgeting lessons.

I also strongly agree with the idea of basic financial literacy being a requirement for credit card use, though I’m not convinced at all that this is the way to do it.

What I Don’t Like About the Bill
What I don’t like about the bill is that it takes away personal responsibility in two different ways.

On one side of the coin is the fact that many people under the age of 21 are fully independent and have their head on their shoulders. One individual I know had a very successful business he was running himself at age nineteen. I know several others who have been through trade school and are embarking on plumbing and electrical careers at that age. Why should these independent and self-motivated individuals be required to find someone to co-sign with them for a credit card?

On the other side of the coin is the lessons learned from credit card ownership, which might actually be easier before age twenty one for many. I didn’t figure out how to use credit cards sensibly until age twenty seven, but I’ll be the first to admit that I didn’t receive a great education on how to use them and what their role should be in your life. If I had, I might have been able to make sense of my earliest credit card troubles (when I was in college) when the amount of debt wasn’t that much at all. For many people, college is a time to learn and make mistakes and grow – this bill just offers more hand-holding.

For me, the negatives of this bill outweigh the positives.

Is There A Better Solution?
The solution needed here is pretty simple – there is a desperate need for better consumer education. Consumer education should be a part of the school system from the earliest stages. Reading, writing, and arithmetic are fundamental, but so is managing your money – not knowing how to do that in the modern world can derail your life.

Instead of sponsoring bills that restrict the freedoms of adults, why not invest a bit more in education and a bit less in other areas?

What do you think? Is the Credit CARD Act of 2009 a good thing or a bad thing on the whole?

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  1. Hmm…having had a credit card since age 18 (and never carried a balance) at first glance I think that I’d have thought this horribly unfair if I was still in that age bracket.

    On second thought though, I could have just used a debit card, and the only difference would have been that I wasn’t building my credit.

    Seems like such a bill would prevent a lot of people from getting into trouble…

  2. Joseph Tanner says:

    I strongly disagree with the bill. Mainly, just because you’re between 18-21, doesn’t mean you should be treated differently. I also think that if you’re old enough to be an adult (vote, serve your country, etc.) you should be treated as one.

    Now, if they reworded this bill, and made it apply to teenagers between 16-18 or so, then I’d agree completely. Just like a graduated driver’s license. Want the privilege before you’re an adult? Fine, but here’s some limitations.

  3. John says:

    This bill is ridiculous. The way I see it is that it’s a parent’s job to teach their kids about managing money, not the governments. The intentions are good, but the execution is poor. If you want to legislate something, legislate that all high school kids must pass economics 101 before graduating. That would have a much better impact on students.

  4. Baker @ ManVsDebt says:

    Although I think that the majority of young people having a credit card is a horror story waiting to happen, I have to agree with he above commenter.

    I become very annoyed with laws that affect the 18-21 year old population. If you are a legal adult… If you are old enough to fight and die for this country… then you are old enough to get a credit card without extra restrictions. Heck, you are old enough to drink, as well.

    Either raise the legal adult age or actually start treating people like legal adults at age 18, IMO.

  5. Amber says:

    Lets not forget that there are many people out there with a less than perfect family life that are completely independent by the age of 18. They need a means of building their credit without getting permission from a source that isn’t there. There are lots of people that get married and have children before the age of 21, and don’t spend foolishly. I think education is the way to go for everyone. Set it up like a federal loan where you have to take a short tutorial online for your first card.

  6. Meg says:

    I’ll be graduating with my BA at 20, and getting married when I’m 21. I’m so glad I’ve had a credit card, because my high credit rating is making it easier for me to rent an apartment.

  7. Anna says:

    I know adults who are less capable of using a credit card than I am at 21. The solution is not to limit credit card usage until 21. It won’t educate people on how to better use credit cards, it will just delay their over usage of credit cards until after they can get one. The only real solution to the credit card problems is to educate EVERYONE on the proper use of credit cards. I have had a family credit card since 16 (used for gasoline and picking up odds and ends for my mom) I saw from her how to use a credit card responsibly, earn points and pay off the balance every month in full. At age 18 I got my own credit card that I was responsible for paying off every month and have had one ever since, no balance no interest. I also know adults who at age 50 have a huge amount of credit card debt because they do not understand the importance of paying off bills in full on time. If you don’t have the money don’t spend it. Limiting minors from having a credit card won’t fix their debt. Instead of spending time creating a bill, they need to educate Americans.

  8. Katherine says:

    I agree with others that 21 seems too old. I prefer 18. Of course, my parents did a very good job teaching me responsibility. I don’t think teens should have credit cards at all, though.

  9. toposhaba says:

    First off, why not make them offer classes for everyone? I know plenty of people above 21 that are irresponsible.
    Second off, it wouldn’t prevent the problem because Gamestop would start issuing credit or people would be buying laptops or whatever from whoever on credit and it wouldn’t matter.
    Third off, how are the under 18 supposed to build credit which can effect everything from their student loan rate to there insurance rate.
    Lastly, people have to learn how to manage money sometimes and if the fall a couple times let them. It like breaking a leg you mend it and it should come out stronger.

  10. Johanna says:

    I don’t understand why you think that “these independent and self-motivated individuals be required to find someone to co-sign with them for a credit card.” It sounds to me like they would easily qualify under the second criterion – if they have income, they can independently repay the debt (and they should not be allowed to take on more debt than their income would allow them to repay) – so they would not need to satisfy the first.

  11. Laura says:

    I’m with the group against laws extending the notion of “childhood” to age 21.

    Back in elementary school, I did see one example of early financial education. Teachers rewarded good behavior with “Buckeye Bucks,” a fake currency. On selected “market days,” the older students were permitted to set up small businesses in a room, selling trading cards, baked goods, origami crafts, whatever they could supply. Students would spend their Buckeye Bucks on these items. At the end of the year, the older students would be invited to an auction of various low-value products (beanie babies, squirt guns, etc) purchased by the teachers that they could bid on with their collected Buckeye Bucks.

    While this system certainly had limitations, it did teach a basic economics to kids with gradations based on age. Younger kids learned that extraordinary behavior was rewarded with currency, which could be used to make purchases. Older students learned how to create retail businesses, how to market products to the other children, and finally that successful businesses resulted in more personal buying power at the end-of-year auction.

    If only this education had been followed up with later lessons on the more complex and perilous aspects of personal finance: lending, investing, and budgeting.

  12. George says:

    Amber phrased my concern exactly. The bill, as summarized by Trent, locks out people who don’t have a “normal” family life.

  13. George says:

    Actually I take back my comment (gasp!) as condition #2 erases the concern:
    + The applicant provides proof he or she can independently repay the debt.

    It’s the issuance of credit cards to young people who aren’t supporting themselves that’s a concern.

  14. Wondering says:

    >> The applicant provides proof he or she can independently repay the debt.

    Isn’t the lack of this one for loans in general (regardless or age or type of loan) a big part of the reason the US is in the mess it’s in?

  15. Rap says:

    I strongly disagree with this bill. Instead of infantilizing young adults even more, we should be encouraging them to understand the *realities* of credit – and of adulthood. If you can vote at 18, pick up a gun for your country, get a job, go to adult jail, etc, then making you have your mommy sign for your credit card is stupid.

    What I would *like* to see is 18 year olds held to the same standard for credit as everyone else. Yes, attending college is a great thing, but it’s not proof of current income and student loan money should not be considered income. Thats how a lot of young people get into trouble – they get the cards because they qualify for no other reason than that they are in college. They generally don’t have steady income in college, so they get into debt. Meanwhile, a kid who at 19 is running his own business without a college degree has a heck of a time qualifying for credit.

  16. So that means, the government has decided you have the maturity and capacity to vote for the President, but you can’t remember to pay your bill on time?

    Regardless, I don’t think those standards are bad. Of course you should be able to repay what you take, and education is certainly not a bad thing. Before obtaining a student loan I had to complete a small course about repayment of debt (boy do I wish it was more comprehensive, so I wouldn’t have made some of my mistakes). It sounds like this might keep some of the predatory lenders off campuses, or at least allow greater promotion of financial literacy. But (since I know it’s coming) I don’t think the credit card companies should be allowed to host the classes because I think that’s a little bit of a conflict of interest.

  17. Stacy says:

    I disagree with the bill. Someone who may be poor at managing money as a teen is not going to automatically be good at it when they hit the age of twenty. It’s not about all about age–it’s about education and values. How many people in their thirties, forties and fifties have thousands of dollars in credit card debt?

  18. Jerry says:

    I disagree with Trent. His main objection’s examples do not fit with his objection. A “fully independent” person between 18-21 must have some sort of independent income or funds, otherwise (by definition) would not be independent. Therefore that young adult would be able to qualify for a credit card without a cosigner, having fulfilled one of the three mandatory requirements of the bill. Passing a financial literacy course is another way to get a credit card without a cosigner. I do not see how a person of any age without independent income could afford to pay for a credit card*, so even that exception makes this a relatively weak bill. I would support it.
    *What a sad reflection of our society. The USA should not even NEED this law. I think credit card issuers are stupid to give credit cards to people who cannot afford to pay them back. That is just poor business. Giving credit cards to people who can only afford to pay minimum balances (allowing them to make themselves de facto debtor slaves) is unethical at the least, but who can accuse most bank executives of being ethical?

  19. Jules says:

    Granted that the brain does not finish myelination until you’re in your mid-twenties–

    –I have to agree. There’s no better time to make the mistakes you’re going to make than in your twenties. And frankly, if the pop quiz they’re going to give is anything at all like the driver’s license exams in many states, I doubt it’s going to affect anything.

    Personally, I take the “sink or swim” view on most things. Most people eventually manage a doggy-paddle. Some even graduate to the butterfly. But if you sink, I’m sure as all hell not going to go down with you.

  20. SJ says:

    Well for a lot of credit card companies lending money is a pretty safe investment; outside of bankruptcy lol. That said, kids in that age group in college are notoriously bad with money and increased ability to pay it off shortly.

    I did fine, got a credit card when I was… 19? And carried a balance one month while I still had 0% APR =)

    The fundamental problem isn’t the credit card. It’s the willingness to spend spend spend. Having credit just lets people do it more.

  21. Matt says:

    I don’t know where I stand exactly. I do not think that anyone (but especially young adults w/o a stable income) should be allowed to have 8 credit cards that they signed up for to get free stuff (eg victoria’s secret, target, walmart, ect…). I think that this form of “marketing” prey’s on the inexperience of young people because they do not understand the consequences of their choices. In addition, in Weston’s article on MSN I feel that her reason for strengthening the bill is that practices such as the above set habits of only repaying the minimum each month. Habits, as we all know, are very hard to break and this one will cost our youth thousands over their lifetimes.

    On the other hand, an adult is an adult. They should not have their lives and choices dictated to them by people other than their parent/loved ones/guardians.

  22. This is not a yes/no situation. It sole depends on the family dynamics and how these kids are being raised. I was brought up in a house where saving and financial responsibility was taught at a very young age and have been able to save and budget the majority of the time – for me a CC was great and it quickly built by credit history and I was approved for a very good mortgage at a young age. On the other hand, I have seen kids go wile on credit cards because the were not brought up on the idea that debts need to be paid back on time. Instead they make minimum payments and now are approaching their late 20’s and still paying off purchases as far back as 5-6years ago (and some even further!).

    I have a good friend who I am helping at present with this debts. He is over 20K in credit card debt and its all from fixing up his car and taking vacations he could not afford. Why did he do it? He said the 0% into interest just sucked him in. Its sad that for years he blamed the bank for suckering him in but I have finally go to him and forcing him to pay more than the 3% min pmts. He is a long way from getting his home, his GF is sick of his bad habits and some might say that its better to mistakes when your young..well…some mistakes take a long time to fix and one of those is your credit history (you cant get a good loan, mortgage, some high paying bank jobs, its all connected to your credit score that you ruined when a teen)

  23. tightwadfan says:

    I would think that in the current economic situation this problem would be self-correcting – that CC companies would no longer be chasing after this terribly risky demographic.

    I had to laugh Trent because I too signed up for my first card as a freshman in college in order to get the free stuff (some candy if I remember right). But back then, in 1993, the limits on those cards were TINY – mine was $500, so we couldn’t get into much financial trouble even if we wanted to.

    Has that changed, what kind of limits are they giving college kids nowadays?

  24. liv says:

    It just says “under 21″…I got a credit card when I was 16. I won’t lie, I had a rocky start, but I got much much better after 1-2 months and I had a p/t job at the mall so I had money to pay it back (had a low limit too).

    I guess once you hit 18 and possibly college, then it’s better for you to not have those kinds of restrictions. Maybe they made the law that way because some youths still aren’t very well educated and maybe can be swayed by the free tshirt people on college campuses.

    Anyone under 18 though should seriously fall under those restrictions…

  25. tambo says:

    Our college student daughter just got her own credit card (with a very low fixed rate) and we’re not at all worried since she’s always been incredibly responsible with money. We’d put her on our Discover card quite a long time ago and she’d only used for an unexpected book for class and to pay the copay for a Dr visit. I really don’t think that having her own credit card will be a problem at all for her. Credit is a tool and at 19 she’s already been working to establish and improve her credit rating. It’s not fair to lump all young people into the same irresponsible vat. Just like any other line of credit, some folks are good risks and some aren’t. Limits need to be decided on a case by case basis not by some arbitrary thing like age. There are 40 year olds who are a LOT less fiscally responsible than our 19 year old daughter.

  26. Ginger says:

    I got a credit card on my 18th b-day. I was working and paying for school. Why should my mother, who was not supporting me, get to decide if I got a credit card. Btw I am now 24 and have a 760 credit score.

  27. Michael says:

    Remember that the “certified financial literacy” course would not help at all, even if it was any good. In my opinion, THE troubling personal finance discovery of 2008 was that increasing “financial literacy” isn’t stopping anybody, including young people, from making poor decisions.

  28. imelda says:

    Even simpler than building financial literacy into our education systems would be requiring credit card companies to provide it. Any teenager wanting to get a credit card has to attend a couple of online seminars or sit through a PPT on basic rules of finance, with government-mandated content, funded by the companies.

    It’s not the end-all be-all solution, but it’s better than what we got now.

  29. kristine says:

    Trent, If only one of the criteria must be met, then a successful 18 year old would be able to prove financial ability to repay, as would be require of any loan.

    Frankly, I think the latter two stipulations are a good requirement for ALL credit card holders.

    It does not remove personal responsibility- it enforces it. When people can’t pay, it effects the entire economy, not just the person who takes on more debt than they can handle.

    The new bankruptcy laws can turn debtors into indentured servants indefinitely, so I laud the effort to make sure credit card holders are ready and able to handle the responsibility.

  30. Len Penzo says:

    Does anybody else see the delicious irony in our legislators trying to impose on its citizens laws to ensure credit responsibility? Only in America folks!

    But to answer Trent’s question, I completely disagree with this bill for the simple fact that there are countless individuals aged 21 and above who have shown that they are unable to use credit cards responsibly.

    This is just one more example of government trying to chip away at our personal freedoms.



  31. I don’t know what the laws are in the US, but in the UK I’m pretty sure you can’t get a credit card until you’re 18. I think that’s sensible, but Joseph Tanner is absolutely right in that if you’re legally an adult you should be treated like one.

  32. Nick says:

    I agree with the bill as a whole, because most people who are independent at 18 fall under #2, or have the opportunity to qualify under #3 if they were so motivated.

    I think this entire ordeal we are involved in right now has shown that we all could use a little education towards financial literacy and understanding, and this could be a step in the right direction.

    Of course, this means that these types of classes need to be readily available to these 18-21 year-olds. Maybe offered for free/very reduced prices at the local community colleges. Or better yet, a certified course offered at the high school level. My high school had business classes that not many people actually took, but if there had been the motivation (you can get your own CC) maybe more would have.

  33. Colleen says:

    My parents signed me up for a credit card after I turned 16, and at that time naturally I was under their constant supervision and so tread very carefully, not wanting to get in trouble with it. Plus, they were right there for me to ask any questions about how the card worked.

    The card came with only a $500 limit, so I had to track how much I was spending to be sure I didn’t get close. I eventually settled on using it to pay for gas for the car I shared with my brother so we could split that bill 50-50 at the end of each cycle.

    Later on, I felt grateful that my parents had started me so early on a credit card, both because it taught me to manage one and also because it set me up with a long credit history for someone my age.

    Incidentally, I had a quarter of consumer education in high school that did teach a few things like how to balance a checkbook while also devoting way too many classes to talking up whole life insurance for some reason. Actually, I had a semester’s worth of “practical arts,” but the first half was devoted to things like how to choose a well-designed outfit to wear…what?

  34. Trent,

    Thanks for sharing. I agree with you on several points here. No hand holding, consumer education is lacking (didn’t learn about money until college) and why should young independent teens pay the price because of the ignorance of others.

    Something needs to be done to better education folks, including older adults which seems to be just as crazy with their spending as some young teens. The point, education would help but doesn’t mean it will solve all our problems. People will do whatever they want sooner or later.

  35. nichan says:

    since “human right” seems like a trend right now, so…
    as long as it doesn’t againts human right, everything is allowed

  36. Sara says:

    Well, if an applicant can provide proof of ability to repay the debt, he wouldn’t need a co-signer.

    I signed up for a credit card when I was in college, too, to build credit (fortunately, I didn’t go crazy with it — I just used it for my regular expenses and paid the full balance each month). I didn’t have a job when I applied for this credit card, so I was told to put my parents’ income, since I was still in their household. My application was based on my parents’ income, but they didn’t have to co-sign for the card.

    As for consumer education, I think there are a lot of people who know better but just give into the instant gratification of paying for things on credit, and no amount of information is going to stop this from happening.

  37. Geektronica says:

    Sounds like an entirely reasonable law to me. I racked up thousands of dollars in credit card debt in college, when I was not working. In retrospect, this seems insane – how could I borrow so much money without a means of paying it back? Student loans are one thing, but credit cards for college kids? Restrictions are in order – I wish someone had told me I have no business getting a credit card until I have a job.

    I got a job right away after college, but a lot of my friends didn’t – things could have turned out very differently for me, and even so, I was saddled with thousands in debt right out of college.

    One concern – if credit card companies know teens have to complete a financial literacy course in order to get a credit card, what’s to stop the credit card companies from offering such courses themselves? Then the information teens get would be skewed toward the companies’ perspective. I’d like to see a specific prohibition of this scenario.

  38. Kathy says:

    I agree that financial education in schools is sorely lacking, but no class or text book in the world is going to make up for having parents who have poor financial skills and poor judgement when it comes to money. Kids learn most of their money managing skills from Mom and Dad.

  39. Kris says:

    This country seems to have a hard time sticking with a definition of adulthood. Once you are 18, you should be treated like any other adult of any other age.

    The bill itself does have some merit as its aim is to cut down on preditory credit card companies ( Capital One, what’s in your wallet ). It would be good if a creditor made sure everyone they gave a card to had the means to pay it back ( not just 18 – 21 year old “adults”), but then they might quit sending my cat Credit Card offers and he does enjoy getting mail ( Capital One ).

  40. Johanna says:

    @Kris: But if a 19-year-old college student isn’t earning income to support herself, then financially, she’s *not* an adult, so it makes perfect sense not to treat her as one. And even apart from that, there’s no particular reason why there needs to be a single age of “adulthood” for all purposes. Back in the 60s, when the voting age in some places was 21 but the draft registration age was 18, that really was a problem, since it really is unfair to ask someone to fight and die for his country, but not give him any say in electing the politicians who decide whether and when he should be called upon to fight and die. But there’s not anything necessarily unjust about saying that a 19-year-old can drive a car but not drink a beer, or can vote but not get a credit card without a co-signer or proof of income.

  41. Everybody needs to realize that you are the only person that is going to be looking out for your own best interests. Not the government and certainly not the banks. We should be providing some basic financial education in schools but it is ultimately up to you as an adult to educate yourself on what you are getting yourself into. Having a cosigner means nothing. All it does is protect the bank by giving them somebody else to collect from and hurts the teenager by teaching them they don’t have to be responsible and pay for their debts. Mommy and daddy will bail them out. Lastly I know plenty of people over 21 that aren’t any better if not worse with handling credit cards.

  42. gsb says:

    I think once you are 18 you are an adult and should be treated fully as one. If financially you don’t qualify for a credit card you should not be allowed to have one.

    I think our society has over the years been extending our childhood years longer and longer where anymore it does seem as though 21 is the new “adult” age. I think so much of this has to do with the fact that you are “supposed” to go to college now in order to get a good job. For some families this means their kids are still jobless and living off of their parents until they graduate which is usually 21 or 22. For these “adults” credit cards should not be approved. For those that are out on their own at 18, whether paying for their own college or going right into the workforce I think as long as they qualify financially, there should be no reason they can’t get a credit card.

  43. kathryn says:

    All the law needs is rule #2: “+ The applicant provides proof he or she can independently repay the debt.” I still don’t understand why companies keep making loans to people who cannot give evidence of their ability to repay them…except that they perhaps like making money from the high interest and fees. What a scam.

    (And some basic financial literacy in high school would be good idea.)

  44. Christine says:

    Here’s my experience.

    When I was 16, I got my first credit card, but never used it. My mother used it to get rewards points and coupons and paid it off in full every month. Thus, I had super-excellent credit before I turned 18. That’s definitely a strong step parents can take for their kids’ financial future, if both have a high level of trust.

    Then, when I went to college, I took the card with me to buy textbooks, and my parents paid the bill. I was on a full scholarship and working part-time; they had no means to pay my school fees or loans and my sister was starting college the next year, so covering books was the one way they could afford to help out financially.

    If I used the card for anything else, my parents knew, because they got the bill. Thus, there was a serious level of accountability built in: when I spent $80 on a pair of jeans, I had to send my mom a check and got a stern lecture. (To this day, at age 31, every time I use a credit card, I still mentally confront whether I can justify the purchase to my mom!)

  45. Caitlyn says:

    I’m glad that you were able to get a post out of the article, Trent!

    Speaking as someone who is in the 18-21 bracket, I pretty much agree with what Trent said. Another thing I would like to know is what the criteria is to meet the “proof” in criteria #2. Does a part time job meet this? A certain level of income?

    I also have a slight problem with the finacial literacy course. I started to take the personal finace course offered at my college, but after a week dropped it because looking over the textbook and what we had covered so far, I realized that I knew far more than this course was going to teach me because I took the initive and studied personal finace on my own, through books, articles, websites, and yes, even blogs like the Simple dollar. Would there be a way for me to demostrate that I already had that knowlege so I wouldn’t have to sit through a class that I learned nothing new in just so I could get a credit card?

    And as far as I have been able to tell, and correct me if I’m wrong, but co-signing really only ensures that the credit card companies will have someone else to go after to pay the debt. My father co-signed a student loan for me, but he never saw any of the bills or paperwork once he signed it. It all came to me.(Lucky for him I paid it faithfully, on time, and paid it off early!) Would co-signing a credit card work the same way? If so, what would that change for a college kid who wanted to use their credit card for whatever, except instill the knowledge somewhere in the back of their heads that even if they can’t pay, Mom or Dad or whoever co-signed will have to so it doesn’t matter how much they put on it?

    Basically, I feel there are good intentions behind the bill, but that in practice it probably won’t do too much to stop those who are using their cards irresponsibly. They’ll just get the card and still make a lot of the same mistakes as they would have if they hadn’t had to follow the above criteria.

  46. Chris says:

    Trent says “What I don’t like about the bill is that it takes away personal responsibility in two different ways.” And then states that many 18 year olds shouldn’t have to have a co-signer. At the beginning he informs us that the bill specifies one of three criteria be met, so any 18 year old able to repay the card would not need the co-signer.

    Personal responsibility. Maybe I feel that my 18 year old should be able to take personal responsibility and decide for himself if he wants to get drunk or not, and I don’t like the government telling me he can’t. Don’t you want him to have that personal responsibility as well?

    There’s nothing to say on this post. It’s a good bill and it does not impose black and white restrictions. The older someone gets, the likelihood that they will not act rashly and instead think about their actions increases. Delaying giving someone credit will be good for kids. If a nineteen year old is in college, is supported by Mommy and Daddy and is probably on their insurance, who should decide if the kid can have credit? Mommy and Daddy. How would you like it if your kid told you she had to pay off a grand because she racked up a bill on pizza for her and the roommates every night? Would you let her ruin her credit, or pay that bill? Why should your kid have that kind of leverage over you? And forget an answer that they can pay it back. They can’t, that’s robbing Peter to pay Paul.

  47. Amen! I agree that limiting cc use to anyone over 21 is ridiculous! Why not oversee the card-shark practices of the cc companies themselves instead of limiting the use of this (unfortunately) necessary evil? I am 28, and am still denied credit at times for a lack of credit history. My file is otherwise fine, and this does limit me.
    While I understand the need to do something, I agree that personal responsibility reigns supreme, and consumers ought to be taught about these things at a young age. My husband and I discuss this all the time, as he deals with it with some of his younger coworkers.
    Limiting the citizens’ ability to use credit is not the answer. Education is.

  48. Question…

    Why would ANYBODY… Give ANYBODY… at ANY AGE a “CREDIT” card if they didn’t meet one of the first two criterion described in this bill???!!!

    And even if they passed the third, but couldn’t meet one of the first two… an older person would NEVER receive credit under that circumstance.

    This is proof of the “conspiracy” by which banks give credit to teens, KNOWING that they can’t repay their debts so that there credit will be jacked up, and when they come back to those same banks to buy a house and/or car, they will have injured credit and that will allow theose banks to charge more interest and make hundreds of thousands of dollars in excess.

    And of course, their is a lifetime to collect… right?

    Yes ladies and gentlemen. We must now in 2009 pass a bill to stop people from loaning out money that they know can’t be repayed. Funny.

    When you hit age 18, you are grown! If Banks would follow common sense procedures for ALL AGES, a lot of people would be in better situations right now. Much to the Chagrin of the banks of course. :)

  49. Lenore says:

    Dude, I got sucked into my first credit card by a free T-shirt too. It was a pink one that said “PS2 It” to promote the “newest” IBM computer on my college campus. (Was supposed to be a play on Nike’s “Just Do It” I guess. Har har har.) God, I’m old. Anyway, that was my first step on the road to ruin. Nowadays credit card companies don’t even give you free junk. And banks don’t give you toasters. Pity.

  50. Robin says:

    Isn’t stipulation #2 redundant? Don’t credit card companies already require you to disclose your income before you get a card to make sure you can pay it back? Isn’t that true with all credit consumers? And if you’re income is low, don’t they give you less credit? It seems like we don’t need a rule to make that happen.

    Anyway, I think its harmful to baby the the 18=21 population. I got my first credit card when I was 18, have never carried a balance, and am fine. Sure that isn’t the case for everyone, but I wonder this: I’m 23, and I recently graduated from college with no real debt but my piles of student loans. I got my first credit card the instant I turned 18 to start building credit. Now I have a credit score in the mid-700s and qualify for AMAZING rates on auto loans (I’m looking into buying a used car, and I can get 0% financing almost everywhere that offers it), renting my first apartment was NO problem, etc. I wouldn’t have been able to get my first CC, even though the one I had had like a $500 limit, I wouldn’t have been able to get it when I was 18 because my parents never would have co-signed, we didn’t have that good a relationship. So if I had to wait until 21… I would only have two years of credit history right now! I would never qualify for the things that I do! I would have to wait until I was 26 or 27 to achieve the same level of credit-worthiness, it would be a serious hindrance to me. Why would be ever want to stunt anyone’s financial growth in that way is beyond me.

  51. MB says:

    I got a credit card at age 16 when I left home for school. I got it with the help of my parents, and it was for use in case of emergency, with a $500 dollar credit limit. I used it hardly at all for a couple of years, and later for for those expenses where I couldn’t write an out-of-state check but I could use a credit card. I have always paid my balance in full, and that credit card is still my only credit card (the credit limit has risen somewhat over the years).

    This bill is a poorly designed piece of legislation that sets some silly barriers–how challenging would it be to provide the required “proofs” that one has financial means?
    It does nothing to address the underlying problem of irresponsible use of credit.

  52. Carmen says:

    Personally, I don’t think age is a major factor in accessing one’s suitability for credit (cards). Financial understanding of the product and ability to repay the money covers it well IMO.

  53. Shelly says:

    Forget the age thing — I think *everyone* should meet one of these two requirements to be able to get a credit card:

    + The applicant provides proof he or she can independently repay the debt.
    + Proof is provided that the applicant has completed a certified financial literacy course.

    There are too many people who don’t understand how to properly use a credit card and get themselves into a load of financial trouble because of it. Age doesn’t matter — my parents are among the group who could seriously benefit from a financial literacy course. I’m going to get stuck with their debt someday and I’m not looking forward to it.

    When I was in college, I chose not to have anything more than a debit card. It taught me not to live beyond my means. I got my first (and only) credit card when I graduated from school. The good status of my car and school loans was enough to give me excellent credit. But all throughout college, I met classmates who had serious credit card issues and were thousands of dollars in debt because they bought things they didn’t need and couldn’t afford.

    I think the age thing is silly. You’re not going to magically understand at 21 what you didn’t at 18.

  54. Linda says:

    I strongly disagree with the bill on two points.

    1) An 18 year old can fight for our country, get married and start a family. I think if you’re an adult, you’re an adult for all purposes. And yes, I think he should be able to have a beer after work, too.
    Maybe *all* people should be required to complete a financial course before getting a credit card. But I would expect that to be a requirement from the creditors, not from the government.

    2) I find laws that try to save us from ourselves insulting. Don’t legislate ways to prevent me from getting myself into a big mess. Either I’m smart enough to prevent myself from getting into a mess, or I’m not. If I’m not, I’ll get myself into a mess somehow or other without legislation.

    For the demographic record, I’m a 44 year old wife, mother of young children, software support manager and liberal Democrat.

  55. Beth says:

    I agree with the bill too. As other commenters have pointed out, it seems to me that the three conditions cover pretty much all of the contingency.

    But I don’t understand Trent’s second objection. People can learn to be financially and personally responsible under the new Act. I don’t see how that has changed, to be honest. I think having to meet one of those conditions is a first step. Unless Trent is suggesting we should give everyone credit cards first and let them figure out how to use them on their own?

    The whole “we shouldn’t punish everyone because of the mistakes of a few” argument doesn’t hold water. If the economic crisis has taught us anything, it’s that we all suffer from other people’s mistakes. (Take it from someone who lives in a country that didn’t cause this mess!)

  56. Ellie says:

    I see many problems with this bill. But the reason they want to do it is because they don’t feel people under the age of 21 are capable of being financially responsible. So let me get this straight. Lets look at all the other assumptions that go by age:
    -If you are over 18, you are capable of protecting our country, smoking your life away, etc. If you are over 16, you can drive a 5 ton vehicle at 70 miles an hour.
    But you can’t own a credit card?

    This is what we need. We need to have mandatory financial literacy classes in high school. I work in the insurance industry and it is shocking how many people don’t know what a deductible is, one of this simplest concepts to understand about insurance. Throw in some credit literacy, etc, and we’ve got a better idea.

  57. Credit card companies are like drug dealers trying to get new addicts– I don’t know if this bill will solve the problem. I think parents and schools need to step in and educate the kids more . . . there are no easy solutions.

  58. Mary says:

    I think this a bad idea because it just takes us farther away from personal responsibility. We don’t need laws to protect us from ourselves, we need to man (or woman) up. Even at 18.

  59. Jessica says:

    I got my first credit card at 16. My parents had to sign for it and willingly did, telling me that since I was working on building good credit at a young age, it would be easier down the road to buy things such as cars or houses. They were right. I am 23 now and I believe that I have a great credit history. I also had support from my family, but even without that, I knew enough to handle the card and pay it in full.

    Still, others might not have had the same advantages that I had to learn that responsiblity. Prevention (ie. this bill), doesnt give young adults the chance to learn these things. They are just putting off the problem, not solving it.

  60. J says:

    The credit card industry should look in mirror more often, rather than blaming their customers for all of their problems, and then using their lobbying dollars to get laws changed in THEIR favor. If they think 18 year olds are poor credit risks, they should treat them like other people they feel are poor credit risks:

    – Low credit limits
    – High interest rates
    – Don’t issue them a card at all until other credit is established, or require a security deposit.

    I don’t think the government should be making laws that protect shoddy business practices like allowing people with limited income (students) access to large lines of credit. “We loaned a person with no income $5000 and then they can’t pay it back, boohoo, how will we get paid?”.

    Idiots. If I made a loan like that (to a stranger), I doubt I’d get much sympathy when I didn’t get paid back. I don’t know why a credit card issuer should, either. Start out with small amounts and then increase the limits as the creditor shows they can handle it, and decrease the interest rate as they show responsibility. If someone with a $500 credit limit can’t pay up, then they are only out $500 and that’s a lot less to eat.

    Let’s also not mention the aggressive on-campus promotions where they want these kids to sign up. I mean, really, if I extended my example of showing up at a college campus with a $5k unsecured loan, who would listen to my sob story when I couldn’t get my money back?

    18 is a legal adult. Let’s keep it that way.

  61. Kris says:

    @ Johanna: What about a 39 year old college student without any income? Is she not an “Adult” then either? Would it still make sense not to treat her as one? I completely disagree that there doesn’t need to be a single age for adulthood, especially if you want young adults to start acting like adults and not like children. In this country, 18 is the age of adulthood. You can do everything in the world you want to succeed or ruin your life ( except legally drink ).

    I am not saying that credit card companies should just hand out credit just because they turned 18… I am just saying the rules for getting credit need to be the same for all adults.

  62. Johanna says:

    @Kris: I would not be opposed to applying the criteria of the bill to everyone, regardless of age. But that’s not the bill that’s been proposed. And since there are many more financially illiterate, non-self-supporting 19-year-old college students than there are financially illiterate, non-self-supporting 39-year-old college students, I don’t think it’s a big problem that the bill as written applies to 19-year-olds but not 39-year-olds.

  63. Kris says:

    Johanna, I think we will just have to disagree with each other on whether age discrimination is fair or not.

  64. Johanna says:

    Well, you might stand a better chance of convincing me if you could explain why you think it is unfair to have different ages of “adulthood” for different purposes, rather than merely stating that it is. To whom, exactly, is it unfair? Would it be more fair if 21 were the age of adulthood for everything – drinking, driving, draft registration, voting, buying lottery tickets, and getting credit cards?

  65. Helix says:

    I appreciate the spirit of the bill, but I disagree with it on one main issue, and it’s the same problem I have with the drinking age – if you’re over 18 you are legally an adult. If you can vote and/or join the military, you should have the same rights as any other adult.

    I do agree, however, that there needs to be much better education. I didn’t get my first credit card until after college because I was terrified of them – I had heard the horror stories. I didn’t goof up with credit cards until I was 27. I think it’s a good idea to make some form of consumer education course a mandatory part of high school.

    Also, as some have pointed out, it’s ridiculous that these companies giving credit cards to college kids with no income and no established credit in the first place.

  66. I recently left this age bracket. While I see how debt building hurts some people, the opportunity to build GOOD credit history early on is also a major factor. Here I am 22 with a well-paying job and thanks to my good credit was able to get a 0.0% APR on a new car purchase. All from having 2 credit cards that I put gas on and paid off at the end of each month.

  67. Roger says:

    I’ll second the point that many others have already made: the second condition allows an 18-20 year old who is capable of independently repaying the debt to get a credit card, so all the nineteen year-old entrepreneurs, electricians and carpenters have a way around the parental cosign included in the bill itself. Frankly, I thought the one of the first two conditions were required of anyone seeking credit; if you don’t have income or other means of repaying the debt on your own, you have to get someone to cosign for you and agree to pay back any debt you accrue.

    As to your second point, Trent, I think that Ms. Weston has the right idea: a charge card (preferably with a low credit limit) would allow the under twenty-one crowd to get experience with credit and start building their credit report with lower risk that they will get in over their heads. And it wasn’t suitable, the three options listed in the bill provide ways to get a ‘real’ credit card.

    And just for the record, I’m 26 and got my first credit card (a MasterCard with a $3800 limit) when I was 16. I was working at McDonald’s at the time, so perhaps I could have qualified under the bill’s second condition, even then.

  68. Jim says:

    I’d draw the line at age 18 rather than age 21.

    They should draw the line somewhere. Age 18 is adulthood so thats a good place.

    I see the problem that college kids get into with the free availability of credit. But people do have to start somewhere with credit cards and if we start at 19 or 25 I think the end result is going to be the same usually, either you can handle debt or you can’t.

    Maybe a little more regulation about how credit cards can work is in order rather than just excluding younger people?

  69. Katy says:

    I strongly agree with this bill for one reason: the only group credit card companies target more than recent bankruptcy survivors are teens at colleges.

    I would have an issue if all three criteria were required, but ONLY ONE seems remarkably fair and well reasoned. It seems as if a lot of people read this as all three would be required.

    If the teen is responsible, he will have no trouble proving income. If the teen wants to learn to be responsible, he can take an educational course (which should be part of the normal school curriculum anyway) or have his parents co-sign and thus be involved.

    This will slow the predatory lending practices on college campuses AND will encourage awareness and education. What on earth could be wrong with that?

  70. Kris says:

    Johanna, how can you even ask to whom it is unfair? It is obviously unfair to the 18, 19 and 20 year old “adults” to be treated like children by the government but then told they have to be responsible like adults. The line should be clear, you are either an adult with the rights and responsibilities of an adult, or you are not. To say that you are an adult, but if you fall within this certain criteria we are going to treat you different and not give you these rights is just a form of discrimination.

    Again, I am not against the stricter guidelines for credit cards, but they should be applied for everyone and not just those the government thinks they need to babysit.

  71. Johanna says:

    So are you saying that any age-based distinction other than the one between adults (18 and over) and children (under 18) is “obviously” unfair? Is it obviously unfair that adults under 25 generally have to pay more for car insurance? Is it obviously unfair that adults under 35 can’t be President of the United States? Is it obviously unfair that adults under 59 1/2 can’t make penalty-free withdrawals from their retirement accounts without jumping through certain hoops? Is it obviously unfair that children under 16 (or whatever the age is in your state) can’t drive cars? Is it obviously unfair that children under 12 get reduced-price tickets in some circumstances?

    Children are not all the same, and adults are not all the same, so why should they necessarily all be treated the same? 18-20-year-old college students are the perfect example: In many respects, they are independent adults, but financially, they are not. It is true that some older adults are also not financially independent, so the age-based criterion in the law is not perfect. But *no* age-based criterion is perfect (Did you wake up on the morning of your 18th birthday to find that overnight you had suddenly acquired all the wisdom necessary to take on adult responsibilities? I sure didn’t), and I think this one does pretty well.

  72. Kris says:

    “Is it obviously unfair that adults under 25 generally have to pay more for car insurance?”

    Yes, just like it is sexist and unfair that males typically pay more than females. Again, its just a form of discrimination, which you seem to be in favor of.

    “Is it obviously unfair that adults under 59 1/2 can’t make penalty-free withdrawals from their retirement accounts without jumping through certain hoops?”

    Well, see there is as this is something you volunteer for and you legally sign up for ( cause you are an adult and you can sign your life away as an adult ). You are following the terms of a contract that you yourself decided to do. This is not a form of age discrimination, this is a legal contract. If you do not want to follow those rules, then don’t invest in a retirement account.

    “Is it obviously unfair that children under 16 (or whatever the age is in your state) can’t drive cars?”

    Since you asked my opinion, I don’t think 16 year olds should be driving either. I would make it to where you had to be an 18 year old adult so that you are liable for the decisions you make behind the wheel. In today’s world, if your 16 year old gets in a car accident, you are the one that is liable and gets sued.

    “Is it obviously unfair that children under 12 get reduced-price tickets in some circumstances?”

    There is a difference between a businesses offering a discount of its own free will and the government regulating the business telling it how to do business with certain age groups.

    “Did you wake up on the morning of your 18th birthday to find that overnight you had suddenly acquired all the wisdom necessary to take on adult responsibilities?”

    I was on my own at 18 and in a lot of ways prior to 18. I didn’t have a parent that would co-sign for me, or to pay my way to college so I could party all night. Within 30 days of turning 18, I had to sign my Selective Service Card for the government in case of a draft because I was now an adult. I also worked 10 hours a day like an adult, had my own car in my own name like an adult and paid rent like an adult… but the government said I couldn’t kill my braincells like an adult and now they want to dictate how other business have business interactions with me. ( if I were still in that age group, which sad to say I am not ).

    You can keep coming on here and drag up the most ridiculous scenarios you can think of to justify the governments age discrimination and their need to regulate everything they can, but it still doesn’t make it right.

  73. Marie says:

    My parents hooked me up with a $25/mo. credit line at school. So, when I saw the credit card offer, it was great. I didn’t have to pay anything each month, and didn’t quite think through how I was going to pay it. I actually can’t remember when I started paying it and how. I do remember paying it at the minimum rate once I got into sophomore year and got a p/t job. It took me years (!) to pay down my $500 balance (the credit limit at the time). This was the best lesson for me. I cut up my credit card and wouldn’t get another one for years until I had to fly to see grandma and needed to buy tickets online. I make sure I never get into debt I cannot handle. So, although I would love to spare kids my pain, I think it’s good to give ’em a *very* low minimum card while they are in school. But, make ’em pay a minimum, so they can learn before they graduate just how quickly money can go out the window. Better to learn early than later when you have to think about wife/kids.

  74. Marie says:

    Forgot to say, the $25/mo. was too little for me. The credit card “increased it” a little bit.

  75. Chris Cruz says:

    I strongly believe that high school kids should be taught how to manage finances in school. It’s essential for EVERYBODY to know about interest rates, debt, credit scores etc. But I dont understand why kids aren’t taught these things. Even when I finished college I had no idea of how to buy a car or a house. I learned how to manage a credit card only after digging myself into a little debt. High schools should set up a mock credit system that teaches kids how to use credit and benefits of keeping a good score and the consequences of holding a bad score.

  76. Tracy says:

    I think education is the answer – not this bill. My husband and I never were never taught how to manage money (by our parents or in school) and we accumulated $20k EACH of debt before we met. We’ve been together for 4 years now and when we moved in together 3 years ago, we made paying off the $40k credit card debt our main priority. Our last payment is next month (and we’re SO EXCITED!).

    Had we learned how to properly manage money before being handed nearly $100k of open credit each, we never would have gotten into this situation and instead of a $40k debt repaid, we’d have $40k in the bank or a down payment on a home. Instead, we’ll probably be renting until I’m in my mid-30s and my husband is nearly 40.

    Not only has this delayed us purchasing a home, but it has delayed us starting a family as well. We want to wait until we have more of a financial cushion and more job stability before we start a family, so we’re looking (realistically) at at least 2-3 more years.

    I’ve learned a lot from the mistakes I made as a 20-something, (I’m now 30) but you can bet I’ll be teaching my children how to budget and manage money before I turn them loose in college. I’m even thinking I should make them support themselves through college to make them more self sufficient.

  77. Sarah says:

    I saved and saved as a child (which I admit is a little odd), so I entered university with nearly $5,000 of my own money in the bank. I was a very traditional university student – my parents paid for my rent and a small monthly amount for food. Except for a part-time job I had no real income, but I did have a decent amount of money in the bank. I had 2 credit cards in college that I handled extremely responsibly. My age and my status as a full-time student didn’t add to – to detract from – my innate personal responsibility that had been there all along.

  78. Leah says:

    When I was 16, my parents handed me a credit card (theirs, with my name on it) and slowly started to teach me about using it correctly. I bought groceries, gas, and school supplies, and those were all allowed expenses. If I bought my own books, clothes, or fun stuff, I always paid my parents back by the end of the month (and in cash!). In my mind, money spent on a card *always* needs to correlate to cash, and I learned this early. Once I got to college, I did get my own credit card (helped with studying abroad and taking trips and stuff), and I was able to use it responsibly. I would have been really upset about this bill if it had been around when I was in college; a credit card made my life much easier. I used it wisely, and I was able to build up a good credit score. When I graduated from college, I needed a car for my new job; I was able to buy one with a loan even though I only had $700 in the bank.

    What I’m saying is that education is the most important thing. Either parents or math class need to teach students how a credit card works; we don’t need to ban all young folks from cards because some people screw them up big time.

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