Young adults' access to credit to change

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Lindsey Duren, 24, says she has learned her lessons from credit cards. She had her first card at 18 with the intent of building credit, but she doesn't recommend it.

"It's real easy to live beyond your means when you have a credit card," said Ms. Duren, a postgraduate student at Augusta State University. "You think, 'It's just $10, it's $15 there,' and you get your statement and it's $500."

Ms. Duren bought her books for her required science classes with financial aid, but she says some students use credit instead of seeking financial aid, a student loan or getting a part-time job.

This year's class of incoming college freshmen might be the last with access to easy credit.

Federal regulations that go into effect in February mandate that anyone younger than 21 will need a co-signer on a credit card. Young adults also will have to submit financial information that proves they can repay any debt, or complete a certified literacy or financial education course.

The credit laws were tightened to ban abusive practices, but there might be some unexpected problems.

For example, if a parent has a bad credit rating, it will affect a child's ability to get a credit card.

"It's going to be difficult for them, and they're going to have to think about alternate funding," said Laura Fisher, the director of the American Bankers Association Education Foundation.

The parent or co-signer will also be at risk, as they are held in joint liability.

Students will also see fewer pre-approved credit offers in their mail. Adults age 18 to 21 must opt in to receive offers.

The new regulations also restrict affinity cards (cards tied in with university or alumni groups) and require parental approval for any increase of credit lines.

Another new consumer protection provision requires credit card companies to give notice before the beginning of a billing cycle of any rate increase. Any increase will not apply to any outstanding balance, and the consumer has the right to cancel the card and maintain a frozen interest rate on the outstanding balance of canceled cards.

Some students have avoided the credit card path on their own. Brad Hall, 22, a junior at Augusta State, said he uses a debit card so he won't have to deal with the extra bills.

Raquel Bellmer, 20, also a junior at Augusta State, said she's planning on sticking with her debit card as a student and has no plans to get a credit card after graduation.

Reach Sarah Day Owen at (706) 823-3223 or sarah.owen@augustachronicle.com.

CREDIT 101

There are various ways to use credit wisely. Here are some tips from Todd Christensen, the director of education for the National Financial Education Center at Debt Reduction Services Inc., and Laura Fisher, the director of the American Bankers Association Education Foundation:

- Start with a checking or savings account. It's a natural transition to credit cards because you've gained practice keeping track of available funds.

- Develop a spending plan and keep every receipt in an envelope.

- Online programs such as Quicken.com and Mint.com can help you budget and break down where you spend your money.

- Signing up for a credit card should be a family decision, especially if a parent or other family member is a co-signer.

- Build credit with an in-store card at a department store or auto repair chain, then apply for a major credit card in a year.

- Start with a secured credit card (tied in with a savings account) that comes with a low APR and no annual fees. Start with a low limit, such as $500, and establish parameters for what you'll use the card for. Books, for example, are a good thing to buy with a credit card.

- Never charge lifestyle items, such as junk food or entertainment.

- Read the fine print and make sure you're aware of the APR, if there is an introductory rate, when it ends, what the following APR will be, and what actions can cause the APR to change.
- Try to discipline yourself to pay off the balance every month.

- Remember: No credit is better than bad credit.

Comments (10) Add comment
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andywarhol
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andywarhol 08/17/09 - 08:06 am
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Great, so once again we have

Great, so once again we have someone stepping in to help run our lives. Rather than let them learn on their own.

thinkbeforeyoutype
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thinkbeforeyoutype 08/17/09 - 10:19 am
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andywarhol, it's one thing to

andywarhol, it's one thing to learn on your own, it's another thing to be targeted by credit card companies on your 18th birthday. The credit card companies have been wrong for years to target 18-21 year old's- most students with no income. They had been betting (and had been winning) that the young adults would max out their cards with a few charges here and there and then that's when the parents would bail them out to save their children's credit rating. There is absolutely no reason that on or around your 18th birthday you should open your mailbox and have 10-20 offers for credit cards and personal loans. It's been a scam for years and one that I am glad is coming to an end.

disssman
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disssman 08/17/09 - 10:56 am
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Boy I am glad grown college

Boy I am glad grown college students will have to complete a "certified literacy or financial course" before they get an account. Alternatively they can sign up for the military and go to war against terrorist until the become of age for credit. I wonder if 17- 18 -19 - 20 year old soldiers need a co-signer for anything? Finally, as to the debit cards, I believe they are the worst form of financial management you may ever dream of, unless you are a strict budget and record keeping type person.

jack
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jack 08/17/09 - 11:02 am
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Well, dipppyman, yeah, 17

Well, dipppyman, yeah, 17 year olds do have to have a parent or guardian sign allowing them to enlist in the military. I don't like gov'munt intervention in our lives, but credit card copanies took advantage of the naivete of young adults, especially college students.

The Ode
2
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The Ode 08/17/09 - 12:15 pm
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Just more government

Just more government interference in the lives of all due to the blatant ignornace of stupidity of a few.

corgimom
32500
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corgimom 08/17/09 - 01:02 pm
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All the 18-21 year old's had

All the 18-21 year old's had to do is THROW THE MAIL AWAY. How many people don't know that if you borrow money, you have to pay it all back and then some?

onecatfish
5
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onecatfish 08/17/09 - 04:41 pm
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Yes you can fight in the was
Unpublished

Yes you can fight in the was at 18,19,20 can you also drink at that age? Can you buy a house at that age? I can go on and on what you cant do before you are 21. I think that it is time to put the credit card companys in there place.

andywarhol
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andywarhol 08/17/09 - 06:28 pm
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Give your children more

Give your children more credit than that. No pun intended. I don't think they're that stupid. All adults know how to do simple math. It's common darn sense that you don't charge something without being able to pay for it, especially if you don't have a job!

imdstuf
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imdstuf 08/18/09 - 03:11 am
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Oh, the poor rich credit card

Oh, the poor rich credit card companies! While I do think adults have to be responsible for themselves, it is hard to expect someone to suddenly know all the things an adult should know on their 18th birthday. They will have to learn some hard lessons as they go, but should not have their financial futures hurt, especially when collectively it hurts the nation down the line.

omnomnom
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omnomnom 08/18/09 - 05:39 am
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what the heck do teens need

what the heck do teens need credit cards anyway? I didn't have/need one until I was 23. I kept on getting pre-approved garbage and I kept on throwing it away, finally got one when I decided to travel abroad and didn't want to carry alot of cash.

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