NCL Personal Finance Issues
This time of year, many parents are thinking about giving their college-bound children a credit or debit card to help pay for living expenses. Once they get to campus, many students may be shocked at the costs they encounter and be tempted to open their own credit card accounts. For these young consumers and their families, abiding by a few simple rules could help them avoid costly headaches down the road.
Thanks to the 2009 Credit CARD Act, credit card companies can no longer swarm college campuses armed with marketing “freebies” like t-shirts, water bottles, or pizzas to give to new customers. In addition, consumers under the age of 21 can no longer open a credit card account without a co-signer (usually a parent).
In response to these restrictions (which NCL supported), many major credit card companies, such as Chase and Bank of America, then stated they would no longer target college campuses. However, cards are still marketed to college students in other ways, and many students may be carrying a prepaid debit card or a credit card belonging to their parents.
At an exciting and confusing time of their lives, college students may be unaware of the challenges and responsibilities that come with having a credit card. New cardholders must understand that credit cards are important to building up a credit history but the risks of misuse and abuse – which may cost them and their parents further down the road – are very real. Responsible use of a credit card can pay off in the long-term via lower interest rates when financing a home or automobile purchase.
The financial information blog, Charge Smart, recommends consumers take six steps before and after acquiring a credit card.
- Compare offers (specifically avoid 0 percent interest introductory offers because once the introductory period is over, you’re likely to be stuck with higher than usual interest rates)
- Set a budget for spending, and pay off as much as possible each month
- Read the fine print credit card contracts BEFORE signing on the dotted line. Fees and other costs often lurk in that tiny mouseprint.
- Pay on time: It’s important for building up your credit history
- Credit limit: The best way to build your credit score is to charge no more than 30 percent each month and pay off the balance promptly
- Set up an online account, so it’s easier to pay on time
The Consumer Financial Protection Bureau (CFPB) recently launched a powerful tool to help consumers compare cards: a searchable credit card complaints database. While the tool is still in its beta stage and a bit clunky to use, it can be useful for consumers to see what types of complaints a particular credit card issuer is dealing with. Too many unresolved complaints, particularly for a company you’re not familiar with, could be a sign that it’s time to shop elsewhere.
A consumer who has been taken advantage of by their credit card company can file a complaint, and the CFPB will investigate it. Filing a complaint is easy, and can be done online, by telephone, mail, email, fax, and referral from other agencies. The CFPB reviews each complaint and, if the complaint is complete and legitimate, sends the complaint to the credit card company for response. The company usually responds back to the consumer, who can take a further step in disputing the company’s response. Only about 16 percent of those who file a complaint with the CFPB take that action. The most common complaints are billing disputes, so consumers should always read their contract over extremely carefully before signing.
The CFPB also provides information on its Website about a typical credit card contract, as well as a glossary of common credit card-related terms. Credit card users of all ages can benefit from studying this information carefully before and after acquiring a credit card. If something does happen, don’t be afraid to file a complaint with the CFPB if the issuer can’t resolve the problem to your satisfaction.
Enjoy making smart consumer choices in college!