Would The New Credit Card Legislation Have Prevented Me From Falling Into Debt In College?
This is a guest post from Adam Baker from Man Vs Debt. I interviewed Adam a while ago and he had an interesting story on how he got his first credit card in college. I’ve asked him to recount his experience and also to voice his opinion about the recent credit card bill of rights legislation. One of the things that attracts me to Adam’s blog is that he writes really long detailed posts with lots of thoughts put into it. I would suggest that you subscribe to his blog feeds here. Below is his post
In my recent interview with Mr. Credit Card, we touched a little on my personal story of how I got into debt. It’s a rather interesting story, especially for those of you that may not know how credit card companies recruit on college campuses.
Up until my first year in college, I had been able to avoid debt completely. This really isn’t too rare, though. I still lived with my parents, worked some part-time and summer jobs for extra cash, and honestly wasn’t exposed to credit cards.
Sometime within my first year in college though, things changed. To be honest, I think it was within the first semester. I still remember applying for my first credit card. There was a large festival/orientation for the different clubs, organizations, fraternities, and sororities. Throughout the large lawn that ran through the middle of our campus were hundreds of tables with banners, posters, games, and other actives advertising their sport or organization. There were sports teams, religious groups, honors programs, and ultra-specific clubs like “comic book collectors”, etc… For the young and naive freshman it was a all-you-can-eat buffet of exposure to new and exciting things.
I remember a booth catching my eye from afar. It was the Purdue University Rugby Team. Really? Rugby in the Midwest was almost unheard of. I had seen the occasion highlight reel on Youtube, but had no idea how to play. I had always been intrigued by the sport and wanted to learn more. As I approached the booth, I was greeted by other students whom where trying to raise money for the club to be able to travel to play other Midwest clubs. It wasn’t an official team, rather just a group of students who wanted to play. The funny thing is they weren’t even asking for money. Everyone knew college students were broke. All they were asking for was for you to fill out this one page long application for a credit card. Their was no obligation, but you did have to put your real name, e-mail, and campus address. As long as the application was from a real person, the club would make $5.
Sounded great! After all, I could just throw away the junk mail I got and help out the team for free. I couldn’t resist! Later, I found out that some other clubs were offering free T-shirt or even a free medium one-topping pizza if you filled out the offers. Holy cow!
Something did feel a little wrong about the process thinking back on it. I had some hesitations after the 3rd or 4th offer I filled out. But I convinced myself that I understood the game they were playing. I almost never opened my junk mail anyway. Why would this be any different?
Snap forward 4 or 5 months. I had adjusted to college life and had blown through my own savings. I had even requested money once from my parents for food, gas, etc… (that’s what I told them). Eventually though, there was a tournament a couple states away for one of the video games my friends and I played regularly. We had the best team at Purdue and wanted to test our skills against more regional competition. Only one problem. No gas… No Money…
Unfortunately, I had a way out. I had a couple pre-approved credit cards still in their enveloped scattered around my dirty dorm room. Even though my gut told me not to, my brain quickly reminded me how badly I wanted to win this competition. Before I even knew it, I was at the gas station and filling up my tank with my newfound $500 limit.
It was too easy and I was too uneducated. I didn’t dive off the deep end immediately, but slowly started using the card for more and more purchases. I was in engineering, anyways. I would have the high-paying job in 3 more years or so.
2-3 years later I had dropped out of college, worked all sorts of interesting, but random jobs and was wanted to start my own small business and was even considered getting married. My life was drastically different and unfortunately now included $10,000+ debt on different lines of credit including revolving, car, and even jewelry (engagement ring).
Luckily, as you can see on Man Vs. Debt now, my wife and I were able to get motivated and passionate eliminate all of our non-student loan debt in a little over a year. Here’s the big question though…
Would increased regulation have prevented this in the first place?
Potentially… but that doesn’t necessarily mean I’m a big fan of ALL the changes.
Reading and discussing the new credit card legislation had me asking that question. First, before we dive into the details of my opinion on the 18-21 year old restriction, let me state that overall I’m a huge fan of the added regulations.
It’s a slippery slope, but in general I don’t feel like the added transparency can hurt. I’m a fan of private business and have absolutely no problem with credit card companies existing and making a good profit. However, I do have a problem when they utilize what I consider to be sneaky and deceitful tactics to obtain “gotcha” fees. I really like that the new bill addresses the following concerns:
- Companies must provide 45 days notice of changes in policy
- Companies must send out bills 21 days in advance
- Companies can no longer justify “universal defaults”
- Companies must accept payment until 5 p.m. on due dates
- Companies must apply payments to highest-interest debts first when applicable
Although the legislation contains many more changes, these 5 in particular help combat some of the shady tricks some companies were regularly using to take advantage of people.
Other than the “pork” that was attached to the bill, my only other beef is with the added restriction on adults ages 18-21. It might sound a little weird given my own background, but hear me out.
We don’t make young adults jump through extra loophole to vote if they are 19 instead of 22. We certainly, dont distinguish between a 20 year old and a 23 year old when it comes to fighting and dying for this country. However, when it comes to credit cards we want to restrict these “adults“. Don’t get me wrong, I would love to see credit card companies off of campuses, but that should be something that the schools themselves step up and ban (which many have done). If we don’t think people can handle credit cards without restrictions until they are 21, let’s raise the legal adult age to 21. If not, let’s keep treating people like adults at age 18 and do our best to educate them before, during, and after.
That might sound like a bold solution, but I’m not so sure it is. What’s next? Should we make anyone under 25 have to wade through tape before getting Adjustable Rate Mortgages? Like I said, it’s a slippery slope once you get the government involved.
I’ve been on both sides of the fence now. I was marketed to when I was young, stupid, and most vulnerable. I thought I was invincible like most 19 year olds. But in the end, it was my decision to start down that path. I made the mistakes, paid the consequences, educated myself, and have taken steps to ensure that the mistakes I make moving forward in my life won’t be the same that I’ve made in the past.
I feel like I’m a better person from surviving those trials, but do realize that many aren’t as fortunate. All that being said, this is the formula our grandparents used and frankly I think this recession has proved that returning to some of their financial principles of that generation could be a good thing for everyone.
