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18-Year-Olds and Credit Cards: Discussion Continues

Earlier this week I brought up the proposal in the Senate-passed CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) which would require adults under the age of 21 to get a cosigner in order to get a credit card (or prove significant income, whatever that means – don’t we have to do that anyway?). I’m not the only one who had an opinion on this particular feature of the new legislation. Here is a taste of what other people are saying about the proposal:

Man Vs. Debt: 18 Year Olds Now Require Co-Signer To Obtain Credit Cards. Still Maintain Right To Catch Bullets With Their Face!

Either you are a legal adult at 18 or you are not.  If you are considered old enough to fight and die for this country, you should be considered old enough to not have to jump through a bunch of hoops to get a credit card.

If you don’t think 18 is mature enough to obtain a credit card or even to consumer alcohol then we should be raising the legal adult age to 21, not placing a bunch of government restrictions, exemptions, and regulations.  In addition, it appears card holders will need co-signer permission before increasing credit limit and making other changes.  Mommy, Daddy, please let me get a credit card…  please!

Independent Beginnings: Attention Students: You are Gonna Need Permission to Open that Credit Card

Traditionally, eighteen-year-old freshman college students have been immediately attacked by credit card offers as soon as they start school. Lacking education on how credit cards work, many of these students jump at the opportunity of opening one of these “magic” cards and end up falling further and further into debt. It will be interesting to see how this will change now that students under twenty-one have to get their parents to cosign with them (or another adult over twenty-one). Will this allow students more time to learn about how credit cards work before amassing huge amounts of debt on them? Or, will this have little effect whatsoever? I guess it would largely depend on the student’s parents’ views on credit card usage.

No Debt Plan: Credit Card Act Passes Senate

Then again it always makes me nervous when government gets involved with business affairs. Yes, the credit card industry has cost millions of Americans billions of dollars. The changes to the age limits makes me uncomfortable. I know that college students have been ignorant on credit card use, but what about the ones who are responsible? And why should the Bank of Mom and Dad have to foot the bill if the student is irresponsible? And what happened to building up a credit history as soon as possible?

(Note: No Debt Plan’s article also has a nice explanation of the difference in the House version of the bill, which doesn’t have the same “under 21” restriction as the Senate version.)

Bad Money Advice: Credit Cards and Our Nation of Children

American laws are ambiguous about when adulthood starts.  For many purposes, 18 is the magic number.  At that at age you can vote, get married, join the armed forces, and, with the looming exception of credit cards, enter into binding contracts including a car loan or a mortgage…

This inconsistency bothers me, but not as much as the worrying general trend of increasing the age at which we consider people to be grown-ups.  And that is just part of an even larger trend, the growing reluctance to treat anybody as a grown-up.

I highly encourage you to check out each of this articles, and pay special attention to the discussion going on in the comments for each. This is getting to be a hot topic, and I say “Good!” It’s about time we talked about young people and debt! I really hope that this under-21 restriction doesn’t make it into the final version of the bill, but I am somewhat glad that it was there to spur discussion.

I’m not a big fan of protecting people from themselves. You know that bumper sticker that says “Let’s just remove all the safety labels in the world and let stupidity take its course?” Well, I’m not quite that harsh, but I think that people only need protection from the things they can’t protect themselves from. I can’t protect myself from a doctor while I’m under anesthesia, but that’s why we have laws and medical malpractice suits. I can’t protect myself from poisoned food and drugs, but that’s why we have the Food and Drug Administration. But I can protect myself from overspending and living outside my means.

As I’ve said, I don’t have a problem with most of the measures in the CARD Act. There are some shady practices in there that are hard for people to protect themselves from, since the credit card companies make all the rules. So go ahead and regulate those things… but don’t tell me I’m suddenly an adult who can handle a credit card at 21 instead of 18.

Sure, I’m a lot better about money and credit cards now, at age 22, than I was at 18 or 19. But that’s because I had the opportunity to screw up. I was 19 when I got that first credit card, and within six months I had run up a balance, because I was living outside my means. In my case, living outside my means meant “trying to go to an expensive film school” instead of “buying Playstations, HD TVs, and drinking every weekend,” but it was still living outside my means. But I dug myself out of that hole and now I use my credit card to earn rewards – paying off the full balance every month. The difference in those three years was experience and education, not some magic maturity that happened when I hit the legal drinking age.

14 responses to “18-Year-Olds and Credit Cards: Discussion Continues”

  1. Baker @ ManVsDebt

    Wow, this was a great round-up of the ongoing discussion around the community. I’m honored to be a part of it!

    Like you, I’m not sure to intent of what’s going on is bad. People are trying to help, but we just have to be very careful when we are on such a slippery slope. We need education, not regulation.

    Great job!

  2. Katrina

    What I don’t understand is you can’t apply for a credit card (likely with a 2-3k credit limit) at 18 but you can apply for 30k+ in high interest private student loans. Yearly I might add.

    It makes no sense at all.

    1. Mike

      I believe there is a big difference between the two, the student loan comes with the assumption you will get an education to help get a job and therefore pay back the student loan. Credit cards are not always used to provide any assistance to getting additional income to pay back purchases (like buying an hdtv). Also note this isn’t a law yet, it might not make the cut.

  3. OStanley

    Great law, best way to get out of credit card debt is never to get in. I think no one whould have a credit limit of more than 700 bucks until they are 20.

  4. TheEnigmaFacade

    Anything that makes you dependent on your parents is a flawed system. Why do so many people assume your parents help you with anything? Especially after you turn 18. Yes, there’s a lot of youth doing stupid things with credit cards, but turning to parental dependency is not the answer. Not everyone goes to college, and not everyone who does has their parents helping them. I should know, and had this rule been in play when I was 18, I would have been financially screwed, as I know my mother never helped me with anything and would not have helped me get a credit card.

  5. CLS

    With regard to student loan versus credit card application it is important to note the differences in interest rates on these two products also. Credit card debt with its high rates can very easily spiral as I know only too well from my student days.It took me years to pay off what had started out as a minor debt. It kept getting bigger instead of smaller. In hindsight a student loan would have saved me a fortune but I didnt understand that at the time.

  6. Andrew

    The reason banks give out loans is because it is a long term loan and they believe you will get a good job after. And fortunately nobody will give you a 30k credit card with 20% interest rate ;)

  7. Matti

    I agree with TheEnigmaFacade. I make my own financial decisions and I shouldn’t have to rely on “mommy” in order to get a credit card.

  8. Damon Day

    It is just more regulation BS. When you think about this it is basically a back door to try and put the parents on the hook for juniors misadventures at college. How about actually doing something productive and making at least 1 personal finance class mandatory in order to graduate high school! If the government would actually educate the young population in the public schools like they are supposed to, then maybe they wouldn’t need to waste time and money passing a stupid law requiring a cosigner on a credit card.

    I agree 100% with man vs debt. Why are kids supposedly mature enough to enter a contract to put their life on the line at 18 without parental permission? I mean are you kidding me? So at 18 we are old enough to make our own decisions when it benefits the government, but if it doesn’t then 18 is just to immature? This is total hypocrisy. So moving forward, most of the kids fighting our wars can’t even get a credit card to use to call home?

  9. aio-holic

    I follow TheEnigmaFacade. If we feel we have the “income” I think we can make a credit card. 18 years old is no problem

  10. joni

    so.. im doing a project at school and would like some imput its on debt in america! if in grade school it was mandatory for our children to get educated on finances whould you be interested? it would be a class that is provided by government and banks together we start with the 1st grade and its very easy to comprehend and it continues till the end of H.S. as it gets into more complex issues as we mature. money is very important to our generation but we just have no education on how to use it without living in debt forever. and another this parents most often than not do not even manage there cards well enough to manage their childrens also!

  11. sophia

    umm credit cards are soooooo useful no mmatter what they say about it it makes my life rockin

    importanceofcreditcards.blogspot.com/

  12. PDQ

    I have heard that credit cards are very easy to get in the USA, I’m from New Zealand and unless you have a significant income, history with the bank and a perfect credit rating it can be very hard to get a crdit card application approved, which is probably a good thing.