(Courtesy of Arkansas Attorney General Dustin McDaniel's office.)
As the summer draws to a close, Arkansas college students prepare to manage expenses including tuition, textbooks and housing. For many students, signing up for a credit card may seem like a simple solution for making ends meet.
Attorney General Dustin McDaniel issued a consumer alert today encouraging young consumers to practice caution when entering the credit market, and to remind Arkansans of laws in place to protect college campuses from predatory credit card solicitations.
“Although a credit card may seem like an easy financial fix today for many young, college age consumers, the long-term repercussions of exceeding your credit limit or accumulating debt with extremely high interest rates can be devastating,” McDaniel said.
The Arkansas General Assembly enacted legislation in 1999 that restricts the practice of marketing credit-cards on college campuses in an effort to combat high-pressure solicitations targeting college students and reduce the growing number of students burdened by credit card debt. Congress also passed the Credit Card Accountability Responsibility and Disclosure (or CARD) Act in 2009, expanding regulations on solicitors marketing credit services to young consumers.
The CARD Act prohibits solicitors from marketing credit cards within 1,000 feet of a college campus or off-campus student gatherings, such as athletic events. Under the law, solicitors are prohibited from issuing credit cards to consumers under the age of 21 unless the consumer has submitted a written application that includes the signature of a parent, legal guardian or spouse that has the means to repay debts incurred by the account, or has submitted financial information that demonstrates the applicant’s ability to independently repay the debt.
Credit card marketers are also prohibited from offering tangible items, such as T-shirts or key chains to encourage students to apply for credit cards.
For young consumers considering signing up for a credit card, McDaniel offered the following tips:
- Avoid accepting multiple credit card offers. A large amount of credit can lead to an enormous amount of debt.
- Choose a card based on the cost of credit which includes the interest rate charged on credit balances and other fees.
- Submit payments on time. Consistently making timely payments is the only way to improve your credit rating and qualify for less expensive credit.
- Pay the balance owed each month. Although it may seem easier to pay the minimum balance, doing so costs more in the long-run and it takes much longer to pay off the debt.
- Be cautious of running up a balance on a credit card with a temporarily low interest rate. Once the temporary rate expires, the permanent rate may turn out to be more than you can afford.
- Steer clear of “over-the-limit” protection. It can be very expensive in the long-run, especially on small transactions.
- Protect your credit score by refraining from “maxing out” a credit card.
For more information, contact the Consumer Protection Division of the Attorney General's Office at (800) 482-8982 or visit www.GotYourBackArkansas.org.