Posts Tagged ‘student credit cards’

Students Find Easy Access to Credit

February 28, 2011, by FreeScore

students credit cardsWhile many students try to cut costs by shopping for books online and searching for affordable housing accommodations, they could still be incurring long-term debt as a result of bad financial credit card habits. Recent research indicates that, despite stricter regulations, nearly one-third of students under 21 have received a credit card since the beginning of 2010.

“The law isn’t doing its job to stop credit card offers to students on campus,” Jim Hawkins, an assistant law professor at the University of Houston Law Center, told the Fort Worth Star-Telegram. “Congress didn’t go far enough.”

As a result, one year after the Credit Card Accountability, Responsibility and Disclosure (CARD) Act was enacted, banks are still advertising through email and Facebook, exploiting grey areas in the law, the news source says. Many students have also resorted to tactics such as reporting their student loan debt on applications or having older friends co-sign on applications instead of their parents.

While making timely payments on these balances will help students build credit, those who miss payments or default on an account could have this information entered into their credit reports, which could make it more difficult for them to get a new card in the future. Therefore, while some young people are building toward the future, others are at risk of damaging their credit histories by racking up long-term debt.

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Students Should Think About Credit Scores and Retirement Now

January 11, 2011, by FreeScore

Around this time of year, many recent college graduates are settling down into their first full-time jobs and getting their first taste of life on their own — paying bills, shopping around for credit cards and insurance, and trying to pay down student loan debt.

recent grads and financial planningWith so many bills to pay, many young people can feel overwhelmed. That’s not surprising, given the fact that the average graduate from the class of 2009 holds $24,000 in student loan debt. Future students and alumni can expect this to rise in the coming years, as this type of debt rose by six percent from 2008 to 2009 alone.

For many young people who are interacting with major lenders and credit card companies for the first time, it’s important for them to understand that, as in many other areas of life, a first impression can be a valuable one.

Those who choose to let their bills go delinquent could end up hurting their credit histories. While this may not seem like a big deal to someone who’s already struggling with a variety of bill payments, bad marks on credit reports often lead to lenders assessing them as increased risks.

This can mean higher interest rates on credit cards, home mortgage payments, and even insurance later in life, and can also lead to credit score damage in the short term.

Another aspect recent graduates may want to consider is developing a plan for their retirement.

“Oftentimes, young adults will postpone saving for retirement because they want to get out of debt before they start to save,” Matt Brandeburg, a certified financial planner, told The Philadelphia Inquirer. “This is very idealistic, but not very practical. If we all waited to be debt-free to begin saving, very few of us would ever be able to retire.”

Bradeburg tells the news source that young people could benefit by setting aside some of their earnings and putting it into savings accounts, investments, and retirement accounts. It’s best to start early, because, by most analysts’ estimates, the average young person will need to save nearly $1.3 million in order to retire comfortably.

While this may seem like a daunting task to people struggling to get by on entry-level salaries, over time, and with a proper financial plan, young consumers will see that the money they’re saving now will eventually blossom into the necessary funds for retirement.

By making monthly payments consistently over time and building a strong credit history, consumers could even add more funds to their retirement accounts, as a good credit score can help individuals save thousands of dollars over the course of a lifetime.

Young people who invest wisely may be able to avoid the retirement issues that plague many elderly individuals today. In recent years, bankruptcy filings and credit card debt have hampered those over 65, forcing many to delay retirement and continue to work well into their golden years.

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College Students Need to be Mindful of Credit Limits

January 3, 2011, by FreeScore

credit limitsIt’s easy for college students to lose track of the money they spend on all the little purchases — the extra cups of coffee for late-night studying, impromptu trips to the movies, and the necessary pencils, pens, and notebooks for class. These little charges can really add up, though, and send a credit card quickly to its limit. However, many students may want not be aware that, oftentimes, the credit card issuers will allow them to spend more than their credit limit amounts.

Many credit card networks, such as Visa and MasterCard, allow users to spend over the maximum amount, and depending on the issuing bank, the fee for exceeding the limit can be as much as $30 per purchase, Financial Post reports. Making matters worse, it can take up to five days for these payments to show up on credit card statements.

Even those who check their credit card balances frequently may not be able to prevent this overspending, according to Financial Post. While this may seem like nothing but a simple fine, these charges can end up on credit reports, which can cause costly credit score damage. These charges also need to be paid for, just as credit card purchases are, and college students with tight budgets may find it difficult to pay them off on time, furthering damaging their credit histories.

By avoiding these payments and establishing a reliable credit history early in life, students may be able to save thousands of dollars over the course of a lifetime. This includes, among other things, receiving lower rates on insurance, loans, and credit cards.

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Low Credit Scores Can Cost Young Adult Jobs

October 21, 2010, by FreeScore

low credit score and jobsA new report suggests the average credit score of consumers acquiring a new or first-time credit card has fallen over the last few years. The lowered requirement opens the door for an estimated 6 million teens and young adults to acquire credit cards, putting them at risk of compiling credit debt and, as a new report suggests, heightened employer scrutiny.

The average U.S. company lost an estimated $160,000 a year to employee fraud, according to a report by the Association of Certified Fraud Examiners (ACFE), leading many employers to take a closer look at employee financial history. In fact, 60 percent of employers check employees’ credit histories, CBS MoneyWatch reports.

The report suggests this could put many younger Americans, who are currently looking for a job, at risk, as only 17 percent of college students tend to pay off the full balance on their credit cards each month.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which went into effect on February 21, 2010, requires individuals under the age of 21 to have a co-signer when applying for a credit card, unless they can prove they have the resources to pay.

This legislation was meant to limit poor credit-using behavior for younger consumers. As a result, many of these individuals don’t have a credit card; the ACFE study found that 60 percent of parents wouldn’t co-sign for a credit card.

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Flaws in Credit CARD Act Allow Young Adults to Apply for Credit

September 29, 2010, by FreeScore

Credit card issuers used to be able to inundate young adults with freebies ranging from pizza to T-shirts to persuade them to apply for cards. Now, the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that went into full effect on August 22 has prohibited issuers from soliciting young adults. The law prohibits credit card companies from offering freebies to college students, in particular, directly on campus.

However, new reports show that young adults are still finding ways around the Credit CARD Act, and issuers are continuing to profit off of these applicants. More college students are having their friends who are 21 or older sign them up for credit, according to Public Radio International. The Credit CARD Act specifically notes that young adults must be at least 21 years old to apply for credit without an adult co-signer, or they must be able to prove that they have the financial means to repay debt in the future.

Credit CARD Act and young adultsNew restrictive legislation was developed to keep young adults out of credit card debt, which can help them avoid credit score damage as well. A report released by New York Attorney General Andrew Cuomo’s office stated that the average student graduates with $4,100 in credit card debt on top of what they already owe in student loans. Americans collectively have $825 billion in credit card debt, according to the Federal Reserve, and many are still working on rebuilding their savings from the 2008 recession.

Experts say it is a growing problem that young adults are still finding ways to obtain credit, but the Credit CARD Act is not flawless. Beth Kobliner, a contributor to PRI, believes that giving parents the permission to sign their kids up for credit is a threat in itself. The Baby Boomer generation is primarily responsible for the economic downturn that led to the recession, PRI reports.

“Who got into this big trouble and led us into this recession in the first place?” Kobliner asked the news source. “The Baby Boomers racked up massive amounts of credit card debt and mortgage debt they couldn’t afford.”

Many parents who have tried to co-sign for cards for their children don’t meet the credit score requirements themselves, PRI notes. Parents who do qualify may end up tarnishing their own payment histories by co-signing if their children fail to make monthly payments on their credit cards.

Although there are a number of risks for young adults who are able to obtain credit, not everything about having a card is negative. Using plastic can help build a credit history over time. There are also positives to the Credit CARD Act that give consumers more protection against credit card companies.

Cardholders now have the option of having their purchases declined if they threaten to go over a set limit, as opposed to paying an overdraft fee. Late fees have also been capped at $25, but experts warn that consumers may be subject to an increase after six months if the cardholder is consistently delinquent on payments.

Bills that aren’t paid in a timely manner may also result in credit score damage. Lenders use credit scores to gauge whether a borrower will be able to repay debt in the future.

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Credit Card Companies on Campus, Investigated by Cuomo

September 7, 2010, by FreeScore

credit card companies on campusReports say that New York Attorney General Andrew Cuomo wrote letters this week to colleges and universities across the state, requesting that they submit any information on contracts they have with credit card companies. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which went into full effect on August 22, prohibits young adults from applying for credit without an adult co-signer or the financial means to repay the debt.

Cuomo’s goal is to identify issuers that may still be luring young adults into applying for credit cards, Bloomberg reports. The industry has been criticized in the past for soliciting students on campus and offering freebies to those who sign up for credit.

“Today’s students are facing a growing mountain of debt that can burden them long after graduation,” Cuomo told Bloomberg. “As the new school year begins, we want to make sure that colleges and universities are doing all that they can to help students avoid financial dangers.”

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When Credit Cards Work for Teens

August 25, 2010, by FreeScore

credit cards for teensThis weekend, under new credit CARD legislation, consumers were given more transparency and protection against issuers. Furthermore, the CARD Act provided parents with greater peace of mind, prohibiting teens under the age of 21 from applying for credit without a co-signer or the financial means to repay the debt.

But, as Technorati reports, cards may not be all that bad for kids heading off to college.

A co-signer with a good credit history can provide a teen with a card they can to use to learn how to manage their finances in the future. Owning a card can also teach a young adult money management skills and responsibility. The more opportunities young adults have to build a credit history, the more likely they are to be approved for loans and other lines of credit later down the road.

Co-signers still maintain a certain amount of control over the joint account. Parents who sign for their children have the opportunity — and an incentive — to monitor their children’s transactions. Active monitoring can reduce the risk of their children accumulating large debt levels, which can damage their parents’ credit scores because co-signers share responsibility for paying off any such debt.

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Survey Shows Most High School Seniors Aren’t Prepared to Handle Finances

June 25, 2010, by FreeScore

teenagers and creditHigh school seniors have spent four years studying a variety of subjects in preparation to head off to college or find a job, but a recent report shows that a large majority of graduating seniors feel unprepared when it comes to handling their finances.

The survey, conducted by Capital One Financial Corporation, was aimed at gauging the seniors’ confidence in handling personal financial matters. The results reveal that those who took financial education classes or received knowledge at home were more confident than those who did not. Nearly 45 percent of participants polled admitted they are “unsure or unprepared” to handle banking and personal finances. Additionally, 34 percent say they only talk to their parents about money when necessary.

“Our survey clearly shows the value of financial education in helping young adults build confidence in their ability to manage money on their own,” Capital One director of financial education Shelley Solheim said.

Talking to teenage children about the value of building a responsible credit history, and the impact of credit reports on their ability to secure loans, low insurance rates, and even employment may encourage them to be more financially responsible.

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Is a Student Credit Card Right for Your Child?

April 29, 2010, by FreeScore

student credit cardsSending a son or daughter off to college leaves many parents scrambling to make sure their child has everything he or she needs. More often than not, this includes a credit card, even if it’s for emergencies.

Obtaining a student credit card often requires a parent or guardian to co-sign for the credit card. Before putting pen to paper, parents should carefully weigh the implications co-signing a credit card may have on their credit standing.

Student credit cards are a great way for students to begin building their credit, but parents are liable for any credit card bills their children fail to pay. Accrued credit card debt will also negatively affect a parent’s credit report as well as their children’s. The risks involved in co-signing credit card bills give parents more of an incentive to talk to their offspring about responsible spending habits and credit monitoring.

The Federal Trade Commission has announced that April is Financial Literacy Month, which will make free training available to consumers of all ages regarding credit monitoring, credit scores, and an overall understanding of credit. Encouraging students to attend credit seminars and courses may help put parents at ease about co-signing student credit cards.

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