Editorial: The wrong line of credit

The process of applying for, using and paying off a credit card provides distinct benefits for young adults more generally and college students specifically. Personal experience is the best way to teach responsible financial management strategies that are critical to success in the real world and Americans, judging by their low saving rates and high credit card debts, are sorely lacking in it. Young people are able to practice paying their credit bills and budgeting for the next month, developing valuable skills in the process. Moreover, allowing students to have a credit card under their own name allows them to build up their credit before graduating, making it easier to rent apartments or make other large purchases after leaving school.

Unfortunately, the act limits many of the benefits of credit card use for young adults. Under the act, individuals under the age of 21 would need to either prove that they have sufficient income to pay off credit card debt or receive parental permission before a bank could issue them a card. Restricting credit card access to those who have sufficient means to pay for them is a reasonable precaution, and it may well prevent students from spending money that they do not have and falling into debt. But providing credit cards to young people that match their low incomes — like those with adjustable credit limits as low as $200 or $300 — would allow students to use their cards responsibly and limit the potential for them to fall into debt.

The act also places the onus of missed payments on co-signatory parents rather than the students themselves. Rather than encouraging young people to be self-sufficient, this provision undermines self-sufficiency by telling students that credit is largely contingent on a parental bailout. It may also inadvertently make the process of obtaining a credit card before graduation more difficult for students who need cards the most — those who have minimum wage or work-study jobs and who may otherwise have proven reliable credit card owners, but whose parents are unwilling or unable to take on the liability of an occasional late payment.

The law does have some commendable provisions. Colleges are required to disclose any agreements with credit card companies under which the school receives payment from the company for giving it access to campus, and companies are subject to more stringent rules for when and where they can advertise to young people. Schools are also encouraged to provide credit- and debt-management sessions to their students. But the best way to teach young people about good credit is to allow them to experience personal financial management for themselves. By making it more difficult for students to obtain credit cards, this new law may hurt more than it helps.