Despite waves of strict legislation, credit card companies still spend millions to attract new, young customers — and many financially inexperienced students are signing up, often to their own detriment.
Gone are the days of credit card booths on campuses and at college events luring students with free T-shirts and pizza.
The Credit CARD Act, which passed in 2009, reeled in much of those practices with laws that restricted card companies from issuing credit to students unless they can demonstrate the ability to make payments or have a co-signer and prohibited pre-approved offers and enticing freebies.
As a result, the number of college-age consumers opening a card fell off dramatically. Only 14.4 percent of consumers age 18 to 20 opened a credit card account in 2012, compared with 33.6 percent in 2007, according to a 2013 study on the CARD Act conducted by the Consumer Financial Protection Bureau. (Last week, the U.S. Department of Education also tightened regulations on debit and prepaid cards, issuing regulations to eliminate "unreasonable fees" and stop "troubling practices" that have been associated with cards marketed to college students.)
These days, in order to get a credit card, college students must either put down a deposit in exchange for a secured card or get a parent or other adult to be a co-signer, which means the co-signer is also on the hook should they fall into credit debt. But there are additional steps students can take to be sure they pick the best card for their needs and start building a good credit history.
"The laws have changed, but students still need to make thoughtful decisions," noted Stuart Ritter, a certified financial planner and vice president of T. Rowe Price Investment Services. "The seeds they plant today are going to have a big impact on their future."