The article you’re about to read is designed to inform readers about credit cards that have an amount of money already added to them. We’ll examine the new C.A.R.D. Act that passed last year and has recently been set into motion. We’ll also see how these new laws will affect teenagers and young adults. The main focus of this passage will be to recognize how the C.A.R.D. Act lessens the chances for teenagers and young adults to gain and retain a good credit score, as well as solving this problem with the use of credit cards that are paid for in advance.
Credit Card Issuers and Teens
Credit issuers have been preying on college students attending universities for years and years. Credit card companies have the idea that consumers will most likely keep their first credit card forever. Additionally, students were targeted due to the thought that studying at a well-known university would eventually lead to higher paying jobs and more money in the years to come.
Money that Teenagers Think are “Free”
During a conversation with a university administrator, I asked if there was any way to limit the number of credit card companies that are targeting the school’s population. Even banning creditors from setting up shop at their school wouldn’t do much good. (We discussed the fact that they’d just move out into the towns where the students hang out.) There doesn’t seem to be a clear-cut answer to this problem. The issues, logically, came from creditors giving teenagers money they think of as “free.” These youngsters have no way to pay off any bills that they racked up.
The C.A.R.D. Act
All of these shady practices finally came back around on the credit issuers. The government’s leaders have set forth a series of laws to keep the credit card companies from overstepping their boundaries. The C.A.R.D. Act was introduced last year and became effective in early 2010. This new law makes it illegal for credit card companies to give out free items to students who apply for their card. In turn, teens won’t be able to build a credit score until they wait a few years. Applicants must now be 21 years old or over or have a co-signer. Additionally, a student who can show proof of significant income may be able to obtain a card. University alumni both agree with and disagree with the recent legal changes. However, there will be no more teenagers without jobs getting lines of credit without their parents’ permission.
Building Credit Without a Co-Signer
Is there a solution for a college student that doesn’t have a co-signer to start to build a positive credit rating? Remember, this person is no longer able to apply for a regular credit line. The answer is a bit of a vicious cycle. One way around the issue would be to use a debit card issued from a bank. These cards are synched with a regular account used for checking purposes, and work very much in the same way. The difference is that you no longer have to take the time to write out a check, wait for the merchant to scan it through their processor, and so on. The cardholder simply swipes the card just as they would a regular credit card. They can then choose to have the purchase ran through as a debit or credit purchase. So what’s the catch? The catch is that hardly anyone using a debit card keeps track of what they’re spending. Due to this fact, banks get billions of dollars in insufficient account balance funds yearly. A significant amount of that amount was fees incurred by teenagers.
Debit Card with a Prepaid Balance
Possibly the best solution to this issue is a debit card with a prepaid balance. Similar to a gift card, the cardholder makes a deposit of cash onto the card. These cards usually contain the symbol of a credit company that backs them, and can be used anywhere credit cards are accepted. The benefit of these cards, though, is that if there isn’t enough money left on the card, it will decline the purchase. These cards are more secure than cash and can be used at more places than paper checks. With tons of prepaid cards out there, consumers are advised to do their research before selecting one.
You might be thinking that the last solution sounds too good to be true. Well, in a way, it is. The downside to these cards is consumers don’t pay a bill every month for these cards, and therefore, don’t get any points added to their FICO score for making on-time payments. Currently, no debit card with a prepaid balance does this, but we are looking forward to seeing one in the future.
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