Do You Need a Co-Signer? Credit Card Reform Act

How many of you have been tempted by a “free giveaway” to buy something? When I was in college, companies would set up tables, enticing students by offering pizza and t-shirts if they signed up for their products. During my first year in college, I signed up for 13 credit cards because of situations like I just mentioned, or the “10% off your first day’s purchases” type of discounts. I didn’t know anything about credit cards – if you asked me what my APR was or the cost of cash advances I would have tried to decipher my credit card statement, but still come up empty handed.

In 2010, the Credit Card Reform Act , in conjunction with Dodd-Frank, aimed to make understanding the responsibility of credit card debt easier. Some of the additions affect current card holders, such as clear and succinct statements and fee structures. The federal government has also added protections for underage consumers. If you are under 21, you will need to show that you are able to make payments by independently earning income, or you will need a cosigner, in order to open a credit card account. If you are under age 21 and have a card with a cosigner and want an increase in the credit limit, your cosigner must agree in writing to the increase. There is also an inducements regulation that states lending institutions can no longer attach free giveaway items to any application process or other obligation. They can still give stuff away, just with no strings attached. Now you can grab a slice of pizza without signing your name!

Luckily, I reached out to my personal banker to ask questions about how to manage my credit card debt before it got out of hand. He shared some great tips that I’d like to pass along to you.

  • Pay on time. For me, that meant setting up auto-payments.
  • Read your cardholder agreement. It will give you information about fees and finance charges.
  • Understand the APRcharged on your unpaid balance.
  • Know your credit limit. Stay well under it.
  • Set a budget and curb impulsive spending.
  • Review your credit report at least once a year. It’s free!
  • Credit has benefits and risks, so understand your options before taking on the responsibility. You have a great opportunity to build a solid credit history. Speak to your lending institutions and your personal banker to clarify any questions you may have. If you’d like to read more about the changes made by the federal government, check out: http://federalreserve.gov/consumerinfo/default.htm

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One Response to Do You Need a Co-Signer? Credit Card Reform Act

  1. Anonymous says:

    Good tips on how to manage credit card debt, though I was always bewildered at one bit of advice I see now and then, namely that of not putting debt on your credit card that you can’t pay off at the end of the month. My natural question to that is always “Well, if you’ve got the money to pay it all off at the end of the month, why not just save up and buy XYZ at the end of the month?”

    I’ve noticed, too, that much of the Credit Card Reform Act regulation and Dodd-Frank, did nothing to educate the consumer about sound financial management and seemed to presume that the banking industry was somehow doing something on the sly to make money management difficult. “You have to make credit card statements easier to read!” went the demand, or “Overdraft fees place an undue burden on the people who can afford it least!” went the cry. Yet what went ignored was the consumer’s responsibility to practice good financial management. People typically don’t overdraw their accounts by accident, but rather because they play “float the check” or use their debit card with no idea what their balance is (or worse, behave as though the balance on their ATM receipt is their actual balance). I’m no quantum physicist, but even I could understand my bank fee disclosures and statement prior to the Credit Card Reform/Dodd-Frank acts. I believe the consumer needs more financial education on financial money management prior to being handed a check book and a debit/credit card.

The Student LoanDown

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