If you start using credit cards at 18, by the time you’re 19 or 20, your credit score could be in the 700-range, which could get you a credit limit of about $5,000, possibly more, Lin says. And if your credit score is around 740, you can get an interest rate of as low as 9%, a tempting idea for a newly independent consumer.
Overall, new credit card rules protect consumers from hefty late fees, high interest rates and reduced credit limits. Plus, marketing to attract credit-seekers under 21 will be restricted, which is expected to prevent younger spenders from racking up too much debt too early.
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If a parent is a co-signer on a credit card, they’d have to be notified of any credit line increase, which could make a student likely to be more conscious of their spending activity.
Why the Changes are Bad
College students don’t just rely on credit cards for clothes shopping and alcohol. Some students need them to pay for books and use them to cover everyday expenses like meals, to avoid “having to eat ramen [instant noodles] throughout college,” Lin says.
And one consequence that may not have been anticipated by supporters of the legislation is that “what we’ll find is that five years from now, there will be a lot of people with thin files,” or no credit score, Lin notes. And if you don’t build a credit history while you’re in college, “when you’re 22 or 25, when you apply for an auto loan or a down payment on a home, good opportunities could be hard to come by.”
Related stories:
Back to School: Resist Credit Card Temptation
Sinking Credit Scores and How to Boost Them
Credit Card Reform Limits Easy Credit
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