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New Credit Laws for Young People |
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by: Debbie Dragon
Many adults who find themselves in financial troubles as they get older generally have some capital, or at the very least, financial experience to fall back on. This isn’t to say that dealing with debt problems is any easier when you’re older, it certainly isn’t, but growing up with debt problems is a serious problem facing the modern youth.
The weight of debt is a noose that is extremely difficult to shake off and if you fall foul with your finances at a young age the effects can be devastating. A recent study by Sallie Mae, a student loan company, found that 84% of undergraduates now owned at least one credit card, which is an 8% rise since 2004. The average spends for an undergrad has also increased since 2004, from $942 to $2,200. The most striking figure unearthed by the study was that 82% of the students fail to meet their full payments each month. These statistics haven’t gone unnoticed and with the government having major concerns over the borrowing potential of students in the future they have decided to implement some major changes.
Stricter Guidelines on Youth Credit Cards
Currently credit card companies have bombard student campuses, wafting the scent of “free” money under the noses of cash strapped students desperate for food and alcohol. Free pizzas, hats, t-shirts, basically any gimmick the financial institutions can use to lure the impressionable youngsters are fair game. Not for much longer though as the government has taken steps to restrict the ability of persons under the age of 21 obtaining a credit card. From February 22nd gaining easy access to a credit card (and free pizzas) will end as three motions are set to take affect:
- Anyone under 21 wishing to have a credit card must have proof that they can comfortably pay off any potential debts or have at least two adult co-signers to vouch for them. Sending pre-screen credit card offers to anyone under 21 will also be outlawed.
- Universities, colleges and alumni associations will have to disclose any contractual agreements they have with credit card companies which allows them to access student and alumni contact info.
- Students who share their account with an adult will have to obtain permission from parents or guardians to have the credit limits increased. Campus promotions by credit card companies will also be banned.
Building a Solid Financial Foundation
Bearing the burden of debt early in life can severely hamper your chances of owning your own home, applying for loans or simply just be able to save for later life. While the new laws will sour the candy coated temptations of credit cards they won’t eliminate them. That’s why it pays to develop good financial habits early and avoid any unnecessary stress in the future. Here are three tips to help you build a solid financial base for the future:
- Discipline Yourself – Don’t learn the hard way that too much debt is dangerous. Learn some self control and don’t be sucked into impulse buying. It is far better to save your money and buy the killer pair of sneakers or iPod with cash rather than credit. Racking up debt on unnecessary items will only serve to plunge you deeper into the abyss when you need your credit card for something urgent. You’ll also end up paying interest if you continually delay your payment which means that must-have dress won’t be quite the bargain you initially thought it was.
- Keep on Track – Noting down your expenditure, however basically, will not only be good practice for when you have to manage large payments, such as mortgages, but allow you to know your limits. The biggest problem young people face, especially when they have the luxury of a credit card, is not knowing where to draw the line. Not knowing your boundaries will leave you clueless as to where your income starts and where your expenditure stops. Make sure you always keep track of what’s coming in and, importantly, what’s going out.
- Emergency Back-up – Having a savings pot on hand to help you out in a crisis is invaluable. Imagine what the country would be like if we didn’t have the police, the fire department, paramedics etc etc on standby when something goes wrong. Putting some money aside each month, no matter how small, will be a blessing when you find yourself in desperate need of some funds.
Making sure you understand how to manage your money is essential if you’re going to survive in today’s economic climate. By not falling prey to the temptations of the credit card companies you and sticking to good financial practices should be all you need to enjoy a prosperous life.
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Credit Card Articles > Student Credit Cards > New Credit Laws for Young People
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