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New credit card legislation hits, misses student credit union

Gabi Madden, For The Miami Student

College graduates entering the "real world" often find themselves bombarded with debt, but recent legislation taking effect in February aims to help prevent them from getting in over their heads.

The Credit Card Accountability, Responsibility and Disclosure Act protects students from serious financial troubles by increasing payment deadlines, holding students jointly liable with another individual (most likely their guardian) until they reach age 21 and not giving personal information to consumer reporting agencies until a card is activated among other stipulations, according to the act.

First Miami Student Credit Union (FMSCU) has a contract with Visa to offer students the opportunity to build credit. FMSCU sets the interest rates and conditions and pays a premium of $2 a month for every account it has. There is no annual fee, and as long as students use the card five times a year, they are safe from additional fees. FMSCU has a fixed rate for students that the new legislation would not affect, according to Willard Hopkins.

Hopkins, manager of FMSC, said the act also has disadvantages for students.

"The act is making it more difficult for students to establish credit," Hopkins said.

One such disadvantage is the age limit associated with it.

"Students cannot get a credit card on their own without being 21," Hopkins said.

He said the restrictions make it difficult for students to build credit and for FMSCU to educate students about finances.

"It is important for students to establish credit before they leave school," Hopkins said. "A number of people are going to pull a credit report when graduates are applying for jobs and apartments."

The act also protects students from credit card gimmicks, making it nearly impossible for banks to offer free T-shirts, hats and other giveaways that will draw students to signing up for credit cards.

Barbara Couch, financial service representative at Fifth Third Bank in Oxford, said the act has changed the way the bank attracts college students.

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"We can't offer things specifically to students to apply for credit cards that we would not offer to anyone else," Couch said. "If we have giveaways, it'd be for anybody, not just students."

Instead of using gimmicks, Fifth Third offers college-aged credit cardholders other benefits. One example is the Rewards Program, which offers credit cardholders the option to receive cash or merchandise by using their credit cards, Couch said. Each purchase is worth a certain amount of points, which can be used to receive cash and other items.

"It depends on the purchases you make," Couch said.

Couch also said that now student credit cardholders must be 21 years old or have a co-signer.

Miami junior and credit card holder Marc Slone hasn't really had an issue with his credit card or Citi Bank, which issued him the card.

Slone's bank didn't even try to rake him in with gimmicks.

"They didn't give me any gifts or anything," Slone said.

Slone uses his credit card only for small purchases like gas and groceries, paying it off every month.

"The only reason I got a credit card was to build credit," Slone said.

Slone said he doesn't think the Credit Card Accountability, Responsibility and Disclosure Act is a necessity.

"I think once you turn 18 you should be able to get a credit card, but the limit should be a lot lower," Slone said. "Everyone should have a chance to build credit with or without a co-signer." 

Additional reporting by Amelia Carpenter