Journo

Give Us a Little Credit

Were credit card companies previously handing out cards like candy

The new credit card bill making the rounds through the House and the Senate provides consumers with the kind of protections they should have had all along--the right to know beforehand when interest rates will go up, to be given enough time to mail in payments, to a 60-day grace period before penalty rate increases due to late payments. These measures, by and large (and with the exception of the attached Totally Random Ammendment about firearms in National Parks--seriously?), seem appropriate and fair to both the credit card industry and the consumer. 

Already we've produced a population of students who feel entitled to things like cars, private educations, and living expenses until graduation without coughing up a cent of their own.

Except for one thing: under the new bill, children can't get credit cards. 

Well, no kidding, you might say. What does a pre-teen need with a Visa? Teenagers have long since been able to get cards through their parents' accounts or with a cosigner, but weren't allowed to take out cards in their own name until age 18, when they could also vote, join the armed services without parental permission, cross state borders, buy cigarettes and pornography, and enjoy a host of other rights given to adults that vary state by state (no booze, though; bummer). The new bill will increase that age to 21, meaning kids aged 18-20 from now on need cosigners and/or parental permission--literally, a permission slip--to take out credit cards in their name and their name only. In some cases credit cards may be granted to the under-21 individual, but not without first determining proof that the individual can, you know, pay back the debt. Proof like income, I guess.

Which begs the question--were credit card companies previously handing out cards like candy to any individual, regardless of age, without checking up on credit score or income? Yes and no, I suppose. Folks who reach the age of 45, with or without jobs, are not simply handed credit as a reward for making it that far. Credit score and proof of income has always determined which consumer gets the best rates, the biggest loans, the highest credit card limits. But undoubtedly credit card companies have been engaged in the practice of making money off irresponsible consumers, handing their customers cards with high interest rates and high limits, counting on late payments and those subsequent fees and rates to make their profit. Of course, while that practice may be legal, it isn't precisely fair. But if the government thinks to bolster its image by acting the nanny--protecting the citizens from themselves (hello, Electoral System, the Volstead Act, and a dozen other failed or faltering propositions)--I hope they have another think coming.

How old do we have to be before we're declared adults, in the fullest sense of the term, by our American government and in our American culture? Already we've produced a population of students who feel entitled to things like cars, private educations, and living expenses until graduation without coughing up a cent of their own. Empty nests are now filling back up with unemployed or unmotivated 20- and 30-somethings (and, often, their children). And while there is a vast difference between the maturity and accumulated life experiences of an 18 year old versus a 22 year old, there are also vast differences in the way the individuals in this diverse age group live their lives. The government says it's okay for all 18 year olds (except gays) to join the military, to fight and quite possibly die for their country, and furthermore to cast reasoned, considered votes in general elections. But other than that, all 18 year olds are not created equal--perhaps by the government's standards, but surely not by anyone else's. 

Some 18 year olds, with or without high school diplomas or GEDs, have already been in the workforce for nearly half a decade and may in fact by practicing a skilled trade and earning a livable wage or salary. Others are struggling to balance full-time work with full-time college schedules; others go to night school; some attend college full-time and devote themselves entirely to their studies. Some live at home with parents, while still others create homes of their own, living in apartments with friends or striking out on their own. This is not neccesarily because life with Mom and Dad (if there is a Mom or Dad) is unbearable--often, and as it was in my case, it's because that 18 year had simply grown up and no longer needs to be provided for. In fact, I would argue, there's often a deep and perhaps illogical psychological need to forge a sustainable life on one's own. By the time I was 18, after high school graduation, I lived on my own at Boston University, paid for with a loan taken out in my name (cosigned by my dad). I had two credit cards with low-to-moderate limits ($500-$3,000) and a full-time job. By 19, I was living on my own in an apartment, commuting to school, with a full-time job. My student debt had grown to $50,000 and didn't look about to slow down, and my credit card debt hovered somewhere between zero and about half my limit, the recommended level. I made on-time payments.

Of course, I was not entirely on my own. I never could have gotten the low student loan rates (about 7-8%) on my own, without a cosigner, and certainly not having to pay for health insurance made it easier to pay for everything else. Today, I have credit cards--with balances--with low rates from 7% to 13%. And while my student debt would be enough to scare away any potential creditor, my credit score shows no late payments and, in fact, contains only good news.

That was then. I'm now 22, and the new bill won't apply to me. I'm on my own. But what about the next crop of 18-20 year olds? What good can come of not allowing an entire generation to start building credit history until they're 21? It takes years to build up sufficient history to buy a home, get a small business loan, or purchase a new car. Unless parents want their children to be financially tethered to their ankles--either by way of cosigning, permission slips, or private family loans--well into their 30s, it might be a good idea to take another look at this. Often credit cards are a reasonable way to build history without making bigger purchases (as I mentioned, my first credit card had a $500 limit and even now my cards have limits between $2,000-$6,000. Considering I've never made more than $25,000 in any given year, this seems entirely reasonable). While my student loan, by now astronomical, would be a good way of proving credit-worthiness, I likely won't get to pay that off for another thirty years--and often students opt not to make payments on those loans until they've graduated, meaning their credit history wouldn't begin to look remotely positive until aged 22, at least. What about those kids who have jobs and opt not to go to school? Obtaining income-backed financing on large purchases, like new cars, that might prove credit-worthiness, are often illogical for young people. Why buy a new car, finance it, and make (between insurance and bank payments) $1000 payments every month when your old 99 Civic from high school runs just fine? Why buy a house when you and three friends pay only $300 in rent? 

The new bill protects a handful of young people without income from irresponsibly digging themselves deeper and deeper into credit card debt. It doesn't allow for the parents that will cosign a card for their offspring regardless of the wisdom in doing so, and it doesn't allow for teens to begin building credit history with uncooperative (or even absent) parents. While a teen with sufficient demonstrable income could, in theory, be granted a card, the new bill simply creates more hoops for these employed, independent young adults to jump through. The new bill creates redundancy where before there existed common sense, and, more damaging, perpetuates the nanny culture that denies adults the authority, the legal and social means, to self-determine, to self-actualize, before the ridiculously advanced age of 21. Treat children like children, and they will continue behaving like children.

Come on, guys. Give us a little credit.