Along with entering college, obtaining a credit card is a rite of passage young adults often tackle. But today’s credit card choices vary, and early credit decisions can require compromises with consequences later in life.
Rebecca Falik, a Binghamton University senior double-majoring in history and medieval studies, said she recommends that first-time credit card searchers read every detail of an offer before applying.
She did not follow this tip herself the first time she applied for credit. She received the Chase+1 card because the service representative at her local Chase branch told her it was the only choice available to students, but she did not realize the card required its users to link their purchasing activity to their Facebook accounts. This meant that her purchases would show up on her news feed, and she said she was worried about how Facebook might use that information.
“I thought, ‘Why would I want to link my credit card to Facebook? Now I don’t even want to use this card,'” Falik said.
After reading further into the card’s details, she discovered that Chase did, in fact, offer a comparable card: Chase Freedom. The difference was that the card was not a student-exclusive card and was therefore harder for those without a credit history to get.
She said after repeated calls to Chase customer service and an application denial for the Freedom card for the same credit limit of $500, they offered her the Freedom card. According to Falik, they gave her the card because various levels within customer service could not agree on why exactly she was originally denied, since all other criteria for both Freedom and +1 were the same, other than student status.
Pipe Dream could not reach Chase for comment after multiple calls to branches and its central customer service center at JPMorgan Chase and Co. in New York City.
A 2005 report from the Federal Deposit Insurance Corporation, the government organization that insures bank account holders’ funds, recognizes the dangers of improper credit choices, but suggests young adults start small. The report, titled “If at First You Don’t Succeed,” is available online at www.fdic.gov/consumers and includes tips for young debtors, such as making consistent payments to avoid interest charges, saving for the future and avoiding fees.
Kristian Rydqvist, Zurack professor of economics and finance at Binghamton University, said the steps involved in starting small with credit involve holding a job, earning income and paying bills regularly. He thought that although minor details of every card are different, they rely on the same basic concepts and compromises between rates and rewards.
“I don’t think credit cards are very different from each other,” he said. “I always pick cards without annual fees. But that’s the only difference.”
Rydqvist did mention that annual fees, the money some credit card companies charge each year to owners of certain cards, can be worth it if a card offers rewards, but only if the reward benefits outweigh the annual fee cost.
“The fee can have value if you travel a lot. I do travel a lot, but those cards wouldn’t help me where I go personally. For a 22-year-old student, though, I would probably not recommend it,” he said.
Still, many BU students see the switch from a debit card to a credit card as a large enough step by itself and rely on their parents’ assistance to ensure they use it correctly and make timely payments.
Olivia Yin, a freshman majoring in cinema, relies on her credit card because she is an international student and does not hold accounts in the United States, but because she was underage, her father co-signed on her application.
The United States Credit Card Accountability Responsibility and Disclosure Act of 2009 also states that people under the age of 21 cannot apply for a credit card without a co-signer without proof of income.
The provisions of the law specific to students include that banks must give specific reasoning and documentation for any event they participate in on a college campus and may not hand out any promotional products to entice new credit customers.
Though the effects of a card’s link to Facebook like Chase+1 are unknown, the federal government encourages bank customers to be as educated as possible before applying for credit. A fact sheet summarizing the CARD Act reforms is available at www.whitehouse.gov/the_press_office/Fact-Sheet-Reforms-to-Protect-American-Credit-Card-Holders/. A step-by-step guide to understanding personal finances, including maximum debt calculators, is available at www.mymoney.gov.