Bill tries to limit student credit cards (Maine)

[jpak]

http://pressherald.mainetoday.com/news/statehouse/070214creditcards.html

AUGUSTA - When Steven and Rachel Goulet's son graduated from the University of Maine, he came home to Greene with something unexpected: about $8,000 in credit card debt.

"We weren't even aware he had a credit card," Steven Goulet said.
It's the kind of story that Sen. John Nutting, D-Leeds, has heard many times. To prevent such problems in the future, Nutting has introduced a bill that would require anyone younger than 21 to get permission from a parent or guardian to get a credit card. Without their parents' knowledge, students sign up for credit cards through the many offers made at colleges, Nutting said. Unschooled in financial matters, the students can quickly rack up sizable debts.

"The shock they've shared," Nutting said of the parents, "is that they knew nothing about it until it was out of control."

The Maine Bankers Association and the Maine Association of Community Banks are opposing the bill, which was the subject of a public hearing Tuesday by the Legislature's Insurance and Financial Services Committee.

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[Selatius]

1. They advertise heavily to college students knowing many don't yet have full financial sense

It is a death trap financially speaking for most students. If you are to have a credit card in college, pay off the damn balance at the end of the month or only use it in cases of emergencies. Compound interest is a harsh teacher.

[leftyclimber]

3. They've also jacked up the credit limit

In the '80s, when I was an undergrad, I got a student credit card for emergencies. 18.9% interest, $700 credit limit.

When I came back to school a couple of years ago, I signed up for a student credit card with 12.9% interest and they gave me a $2000 credit limit. I certainly didn't have more income, relatively speaking, than when I was an undergrad. They just offered me that much credit. And they've raised the limit twice, and I think it's now at about 4 grand.

It's currently paid off (they keep sending me these "why aren't you charging anything?" letters), but I watch some of the undergrads here, and they're spending money like drunken sailors. I'm driving a beater car, wearing jeans that are about to rip out in the a**, and occasionally buying a new shirt at Target. Lots of the undergrads are going out drinking three-plus times a week, eating out on a regular basis, and wearing the latest fashions. I keep asking myself, "where are these people getting all this money? You can't tell me everyone at this U has rich parents." (flagship state school) Hell, you can recognize where people are in their education by what they drive -- undergrads have the nicest cars, and the other cars get more and more crappy as people move along the tenure track.

It's bad enough that this generation coming up is going to be saddled with such obscene student loan debt. To, in addition, be constantly bombarded with all this buy-buy-buy-for-everything-else-there's-Mastercard marketing at an age where many just haven't been taught the savvy that needs to go with it, well...

[Gormy Cuss]

2. I'd approach the problem differently.

If a credit issuer extends credit to someone with no independent means of support and no co-signer, the issuer assumes all liability for default and can neither report the default to credit bureaus nor pass on the cost of recovery to other customers.

I'm uncomfortable with treating 18-21 year olds like children but I do recognize the allure of free money. I've known a few people who were up to their eyeballs in credit card debt by the time they graduated from college. It took them years to get rid of that debt, and most of them were paying out for college loans too.

[hughee99]

4. I agree about the problem, but

requiring parental permission is not a good idea.

[Deja Q]

5. Paying people a proper wage negates them FROM needing a credit card...

For wants, necessary tools, and even these days basic necessities for all too many.

They can bitch about credit cards. But while they ignore the opposite side of reality, it's only an insult against the working class(es).

[hughee99]

6. I think the argument seems to be

that some people do not have necessary maturity or understanding to be able to responsibly use credit cards during their college years. It sounds to me like they're talking about the people who are using credit cards for their wants, not their needs. Paying people more will not curb their wants. I am 100% for paying people more, don't get me wrong, I just don't think that's going to fix this particular issue.

[SheilaT]

7. Parents often need to be pro-active about this.

When our oldest was still in high school and was going to be away for a six week summer program in another part of the country, we obtained a credit card for him in case he needed it for emergencies. We did it as a second card on a brand new credit card that was in my name, and I never used it, so that any and all bills would be his. It started out with a $500.00 limit, and the very first time he charged something, probably about $30.00 somewhere, and it was paid off, the limit was immediately raised to $1,000.00. It was frustrating, because even though he's a very responsible kid whose wants and needs are quite modest, I didn't want him having a credit card in his wallet with that high a limit.

I suppose the problem was that the account was really in my name, and that as an adult I good credit and a decent income, so easily qualified for the higher amount.

This son has since gone on to establish credit in his own name.

We need to start working with number 2 son in this area.

[hughee99]

8. A good idea...

I've heard several people suggest this. It seems to me that the only real way to prevent this situation is for parents to educate their children about credit cards before they go off on their own rather than trying to have some regulation implement a "one size fits all" regulation on young people. Since children are considered adults at 18, I don't know "parental permission" would even be workable legislation for college students.

[SheilaT]

9. Exactly.

People are legally adults at 18, although most don't have enough experience or knowledge not to make lots of mistakes. I'm old enough that when I was that age the only credit cards out there were American Express, Diners Club, Carte Blanche, and maybe a couple of others. In the early years of Visa (then called Bank of America Card) and Master Card, there were income requirements, and not everyone could qualify. But that changed, as the credit card companies came to realize that they could make a great deal of money in fees and interest charges.

Plus, of course, there are those terribly appealing ads that show someone's life being made wonderful by using a credit card, without any consideration about the eventual need to pay the bill. TV shows and movies depict people living beyond their means, without really acknowledging it, simply by putting them in neighborhoods, or apartments, or wearing clothes they could not realistically afford on what they'd actually be earning in the job they're shown as having. No wonder it's so easy to feel both deprived and entitled.

[dysfunctional press]

10. i'm just glad that i got out of college before this kind of stuff exploded.

we just lived on the cheap, instead. fer instance- i used the odometer to determine when i needed gas instead of the gas gauge, because i never put enough gas in the car to move the needle off of "E".