Back to School, but Hopefully Not Back into Credit-Card Debt

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The second part of the new credit-card law is aimed at helping college kids and other younger folks stay out of debt. Banks aren’t allowed to issue cards to anyone under age 21 unless the person has a co-signer or demonstrates independent means to pay bills. That part of the law won’t go into effect until February. Until then, kids can get credit cards—and dig themselves into debt—pretty easily.

And college kids are quite good at this. In 2008, college seniors had an average of $4,138 in credit-card debt, and one in five seniors carried more than $7,000 in debt, per a WSJ story. That’s especially bad considering the lack of job prospects once those students graduate.

Because the goal for a student should be to figure out how to use plastic responsibly and establish some credit history (because it may be difficult to rent an apartment otherwise), the WSJ offers some options other than simply letting a kid sign up for every card he wants and letting the bills fall where they may. You could make your child an authorized user, or help the kid open a checking account that comes with a debit card rather than a traditional credit card. Just make sure the debit card won’t assess $30 or more in “overdraft protection” fees every time the student tries to use it and there’s not enough money in the account.

A series of Consumer Reports’ blog posts this week covers the world of college kids and money, including a post about credit-card debt. Among the somewhat obvious yet solid advice:

While building a good credit history is a smart move for students, the best way to do that is to shop for a credit card with no annual fee and use it to charge a recurring expense, paying off the card bill on time and in full each month.

But be wary of pre-paid cards that may be marketed to students and others with a skimpy or poor credit history because this kind of plastic is likely to only get them in more hot water.

But let’s face it: College students aren’t all that different than “adults.” We’re all equally able to spend crazily and get into debt. Everyone needs to figure out how to choose a credit card (or cards, let’s face it) and use it wisely. Plenty of changes are occurring with card terms and APR rates, so it’s certainly a time to reassess if the cards you have are worthwhile, and if a change is in order. Check out a NY Times story describing some of the options if you’re already in debt, if you want cash back, and so on.