The Brown & White

The Federal Reserve Bank proposed new rules on Oct. 21 to regulate the marketing of credit cards to younger people.

The good of these provisions is to help young people by requiring credit card companies to disclose agreements they make when marketing to students.

The Board of the Federal Reserve System requested a change to Regulation Z of the Truth in Lending Act, which will require complete disclosure of the terms to credit card arrangement. The new rules will also protect credit card users from unexpected increases in interest rates.

"There is nothing wrong with credit cards, as long as you know what they are there for," said Rich Kish, chair and professor of the Perella Department of Finance at Lehigh. "Credit cards are useful for building a credit history and buying things online. These provisions will help lessen the targeting of college students."

Another restriction is the requirement of a cosigner for anyone under the age of 21.

"Now the credit card companies have to jump through a second hurdle of cosigning. If you are under 21, you have to have a cosigner and they are usually your parents," Kish said. "They will become liable for the bills you can't pay and it will affect their credit history as well as yours."

"A lot of young people think this is a bad movement because they are having a hard time getting credit without the help of their parents," Kish said.

Erica Adams, '10, a credit card user, says she is solicited by credit card companies. "The new rules probably won't help us avoid being targeted. Credit card companies are very persistent and will most likely continue to try to target us," she said. "Most 18-year-olds and older do not look to into the fine print of the credit cards."

Matt Loftus, '10, who also has a credit card, is almost never solicited by credit card companies and also believes that the new regulations won't make a difference. "We are still very valuable to the credit card companies," he said.

Both Adams and Loftus pay their bills monthly to avoid debt.

"Most students are not handling their credit well. Those who use them are running big bills with high interest rates which they can't pay off," Kish said.

A study by Sallie Mae released in April 2009 estimated that the average credit card balance for undergraduates is $3,173.

A few new arrangements will be effective in February of 2010 and the rest will go into effect next August.

"If you are going to sign up for a credit card, shop around first and find the ones with the lowest fees and with incentives. Make sure you know and read about what you are getting into because most are not easy to read and understand," Kish said.