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Dealing with credit cards in the wake of the CARD Act

After another summer that has gone by all too quickly, it is back to school season again. College students around Colorado are preparing themselves to head off to school for another year, which, as discussed previously in this blog, can entail a great deal of financial planning in itself.

One essential part of a college student's financial life, as well as Colorado residents of any age, is the use of credit cards. Credit cards can be important for younger individuals to help build credit, as it is important to establish a credit history that will allow a person to obtain better rates and financing in the future.

Along with building a credit history, however, can come a great deal of credit card debt. Credit cards can be dangerous in this sense, because even one missed payment can result in the application of high interest rates, which adds on even more debt.

Given these pitfalls, Congress enacted the Credit Card Accountability, Responsibility and Disclosure Act of 2009, otherwise known as the CARD Act, which imposes certain restrictions on financial institutions offering credit cards. For example, individuals under the age of 21 may not be offered credit cards under the Act unless they have the ability to make payments. Alternatively, if a co-signer is available, the individual may be able to obtain a credit card. New disclosure and notice requirements are also imposed on credit card companies under the CARD Act.

Recent statistics showed that 14.4 percent of individuals between the ages of 18 and 20 opened a credit card in 2012. This represented a large decrease from five years prior, when over 33 percent of individuals in this age group opened new credit cards.

While measures like the CARD Act have brought about new protections for consumers, there are still many individuals who face high credit card debt and who are in need of debt relief. When other means of debt relief fail, bankruptcy may be necessary because it can discharge unsecured debt from credit cards.

Source: Fox Business, "Getting your student a credit card," Jeanine Skowronski, Aug. 19, 2014

Source: Fox Business, "Getting your student a credit card," Jeanine Skowronski, Aug. 19, 2014

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