The CARD Act has benefited numerous consumers by preventing certain practices on the part of credit card lenders that may have caused the costs associated with owning or using a credit card to become excessive and, as a result, lead to troubles in the lives of consumers. More transparency has been offered, in terms of the overall costs a cardholder will pay if they carry a balance and continued to meet minimum payments, but there have been changes for the options that are available to consumers who are under the age of 21, which may be a hindrance for those who are attempting to establish their credit early, like when they are in college. Obviously, this rule was set in place to help prevent predatory lending on college campuses as many college students would sign up for credit card offers and find themselves in a great deal of debt, usually with a high interest rate down the road, that could create a financial setback that followed them years after graduation.
However, there are some who feel that cardholders who may want to build a credit history or begin the process of simply establishing some form of credit can benefit from secured credit cards as a result. Young consumers, like those who are, again, in college, may benefit from establishing a more positive credit history earlier as, after graduation, when it comes to getting a car or qualifying for a home loan in the years following school, a more positive credit history could be beneficial in finding affordable rates on forms of financing. Secured credit cards are usually associated with bad credit repair, but in the life of a young consumer, they can be helpful for simply establishing a credit score and could be a safer option than some unsecured cards.
While there are many financial institutions who would still require that a cardholder who may be seeking a secured credit card still adhere to the CARD Act criteria, meaning they show evidence of having an ability to repay their debt obligations or provide a cosigner, some consumers feel that a secured credit card is safer due to the fact it is backed by an account. As an example, students in college may be able to get a parent to cosign for a secured credit card, if a cosigner is required, and would then be able to deposit a sum of money into their account which would then set the credit limit on their secured card and, in many cases, this can also bring a more affordable interest rate.
Once a secured card has been acquired, a student can make affordable purchases each month and even if they are on a limited budget or may simply have a part-time job on campus, a student can pay the entirety of this debt once their bill comes and, again, begin to acquire a positive credit history. Some consumers under the age of 21, like college students, may simply use a secured card to purchase food, books, or for other expenses, keeping them well within their credit limit and ability to repay, which would then reflect well after years of college where this particular individual has built a positive credit history.
Proper use of a secured credit card can lead to unsecured credit card offers, and there are some arguments that if a cosigner is required anyway a student may want to simply look at unsecured cards in addition to a secured credit card, but looking at any long-term interest rate increases that may result after an introductory period has expired and making sure that credit card activity will be reported by their lender will be necessary so that a cardholder will benefit from this credit card use.
However, consideration must be taken on the part of a consumer as, again, the ability to promptly repay these debts will be necessary so that a balance is not carried, interest rate charges will not accrue, and potential financial problems arise. Yet, consumers under the age of 21 who may want to begin building a positive credit history early will, again, need to compare various credit card offers to make sure they find one that will offer them the affordability to start their financial life off on a positive foot.