Mar 15, 2010

Students and Credit Card Debt: The Current and Coming Crisi

In light of the current budget crisis' going on in states throughout the nation, student's vulnerability to draconian credit card companies has never been so great. Considering the fact that the average undergraduate carried $3,173 in credit card debt in 2008, the case is great for involving students in the battle against credit debt exploitation. In addition with students' main avenue for paying for higher education, student loans, students find themselves being much more susceptible to credit card debt. The average student graduates annually with about $25,000 in student loan debt and, with the rising cost of higher education, credit cards seem enticing for many vulnerable consumers as a short term coping mechanism for the current financial crisis.

With that be said, it is important to garner support for a Credit Cardholder's Bill of Rights put forth by Representative Carolyn Maloney. Representative Maloney's bill does many things, but the points I focus on here surround students particularly. It protects students from excessive over the limit fees, implements fairness in a consumers payment to credit card companies, reduces overzealous penalizations aimed at burdened consumers, and protects vulnerable consumers from fee heavy subprime credit cards. The bill of rights does this by requiring that all fees for subprime credit cards be paid up front prior to issuance. It also asks that credit card companies limit the amount of over the limit fees they charge to just three. Currently, some credit card companies are allowed to charge their customers these fees without limits. Likewise, the bill prevents credit card companies from charging interest on payments made on time during a grace period. This practice is called "double cycle billing." Lastly, when consumers make payments on their debt, credit companies unfairly allocate those payments to balance with lower interest rates first. The bill makes it so that companies must allocate payments fairly amongst customers with debt of varying interest rates so that consumers aren't continuously locked into high interest rate debt.

The Credit Cardholder's Bill of Rights comes at a time when students need credit relief the most. With legislation like the Student Aid and Fiscal Responsibility Act, the American public has the opportunity to reel in the rampant abuse imposed on vulnerable consumers, like students, by socially irresponsible corporations and companies. Those who are often unequally impacted by credit card debt, low income and middle class families and individuals, would do well to back the Credit Cardholder's Bill of Rights. As a student myself, and a holder of considerable amounts of credit card debt, it would be a great disservice to me and others like myself to pass over this opportunity to reform the runaway credit system. It is with that personal investment in stopping the unending cycle of exploitative credit debt that I emphatically encourage students, parents, and families to make a call to your local representative to endorse and support Representative Carolyn Maloney's Credit Cardholder's Bill of Rights.

- By Edward Muna, University of Santa Barbara student and USSA Board member

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