When it comes to credit, it’s understandable that many parents are wary. There’s a dark history to credit building and credit card usage among college students that younger generations aren’t aware of.
Prior to 2009, credit card companies had a lot of leeway when it came to offering credit cards to college students. In fact, many card companies would set up booths on college campuses and offer things like free t-shirts or pieces of pizza to students who were willing to sign up for credit cards. On top of that, as soon as you turned 18, you were likely to be bombarded with pre-approved credit card offers in the mail.
While it’s true that credit cards usually won't force anyone to spend money, millions of college students over the years ended up with credit cards with sky-high credit limits that they could use at their discretion. Plus, these credit card companies had the ability to hit cardholders with surging interest rates and extra fees.
Taking purposeful steps to research and apply for a credit card is one thing, but handing out credit cards with little to no questions asked led to generations of college students that ended up saddled with credit card debt. This is the unfortunate story of many parents or friends of parents out there. They’re all too familiar with the negative effects credit cards had when they were younger.
It’s easy to think that the way credit card companies operated 30 years ago is the way that they operate now. But there’s a lot more to the story.
In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act - also known as the Credit CARD Act. The CARD Act went into effect in 2010 and massively altered the credit card landscape on college campuses and among college students. Here’s what the CARD Act changed:
Credit card issuers are no longer allowed to share credit data between each other for people under the age of 21. This means you get fewer preapproved offers in the mail begging you to open up credit cards.
People under the age of 21 can’t get a credit card without a cosigner or proof that they’ll be able to repay their balance - usually proof of income. This means you’re far less likely to be approved if you don’t have the money to pay your bill.
Credit card companies can’t market personal credit cards within 1,000 feet of a college campus. This means no more handing out pizza on campus in exchange for applying for a crappy card.
Credit card companies must also take steps to familiarize their customers with their products and their features. This means that every credit card comes with explainers about how to use it and what you might have to pay if you don’t use it responsibly.
Prior to 2009, credit cards had every tool at their disposal to squeeze profits out of college students by making it easy as ever to make mistakes. That combined with the fact that college students are busy, don’t always have incomes, and tend to be more rash in decision making created a perfect storm. Credit cards had a severely negative effect on millions of college students.
But the CARD Act should make everyone - including your parents - feel better. Credit card companies no longer have the ability to be quite as predatory. But you shouldn’t let your guard down completely.
It’s true that credit cards can be used to your advantage if you spend reasonably and act responsibly. But they’re not for everyone. They still have sky high interest rates, they still find ways to market to college students, and you can get stuck with a big bill you can’t pay off if you’re not careful.
The ultimate solution is to educate yourself so that you’re unlikely to make mistakes. If you decide to get a credit card, know when you need to pay your bill. Know how much you can spend and still be able to pay it off. Know what kinds of fees you might have to pay.
The other option is to just get a Fizz card. Fizz is a debit card for college students that helps build credit and earn rewards. With Fizz, you won’t have to worry about staying on top of things. Fizz has no interest rates and no fees. Plus, Fizz connects to your existing bank account to keep you from spending more than you have. Your card is paid off from that connected account every single day, so you won’t be stuck with a big bill at the end of the month.
Your parents have every reason to be nervous about credit cards. Given their dodgy history, it’s a natural reaction. But credit shouldn’t be scary - for you or your parents. So get a Fizz card for everyone’s sake.
Sam is a Kenyon College alum and is head of content at Fizz. He's been a go to personal finance resource among his peers since getting his first credit card during his sophomore year of college. He hails from Washington, DC, loves all things aviation, and currently lives in Los Angeles.