Change is what President Obama promised to our country. That is surely what he gave to the credit card industry. The most extensive changes to the industry in 40 years occurred just three months ago on May 22, when Obama signed a law putting his new plans for credit card reform into place.
This plan was put into place to try to help Americans who are totaling over $973.5 billion dollars in credit card debt, also to try preventing others from falling into those numbers.
“The impact that credit cards have on people is amazing,” said Jenna Chiavoroli, senior, elementary education major. “I currently have a credit card that I try to use very wisely. I think these new laws being put in place are a great thing for the people issuing them and the people using them.”
The main points of the new legislation are to reduce interest rate increases and penalty fees as well as reducing the marketing of credit cards to college students.
The law has banned credit card issuers from raising interest rates on existing credit card debt if the consumers have paid their bill more than 60 days late. It also told issuers that they cannot charge an over-the-limit fee unless consumers have asked for this additional credit. Banks also cannot impose late fee if they delayed crediting a payment.
“The ‘ability to pay’ rule seems like and affective aspect to the new law,” said Dr. Eric Malm business administration professor.
The last part of this law has a lot to do with college students. Banks are no longer allowed to extend credit cards to people under 21 without verifying their ability to pay or getting their parents’ permission, as long as their parents are in good financial standing.
Most of these steps to lower credit card debt in the United States will not come into effect until February of 2010.
The problem many college age students are facing is that when they graduate and decide to get a car, a new cell phone plan or rent or a buy a home they are going to need a credit line. Building credit is an essential thing to live an independent life. There are many things that cannot be done without it.
“Your credit determines so many things in your life and is something that is very easy to ruin but much harder to fix,” said Malm. “While it is a great tool that is needed its important to use it wisely.”
Most college-aged students are being stressed to apply for credit cards now before the new legislation is set into place so they can establish credit. Though they are being stressed to get the plastic, they are being told to be cautious and not to spend frivolously, this being the reason the laws have been set into play in the first place.
“The new legislation scares me a little bit because I have yet to establish credit,” said John Solewin, junior, political science major. “I’m in the process of applying for a credit card before it becomes to much of a hassle.”
The legislations like anything has its weak areas. Many people are against the new reform plan because they feel that it is not full proof and think that things could go wrong.
“Like anything this legislation is probably not perfect, but I think it is very reasonable in helping people not get into credit card debt,” said Malm.
These new laws are not meant to give people a free pass. Consumers are still expected to live with in their means and pay their bills on time. The credit card companies are also still expected to act responsibly. College students should begin to get credit cards and establish credit because of its importance. They should also use them wisely and completely understand how bittersweet they are.