There’s a lot to like about the long overdue credit card reform bill. The measure will make it more difficult for banks to take advantage of consumers by jacking-up interest rates and changing terms midstream. The measure also will force companies to provide consumers with more information about the price they pay in finance charges for only making minimum payments each month.
It’s still not clear if card companies, in a bid to boost profit margins, will exact their revenge by charging higher fees to customers who regulary pay-off their bills in full. But Ron Lieber, in a piece in The New York Times today, makes a good argument why card companies probably won’t hit back at those customers too hard.
However, the biggest reason to cheer the new bill is the provision that will make it difficult for banks to offer credit cards to anyone under the age of 21. For years, credit card companies have taken advantage of the young by showering credit card deals on college age people—many of whom have no regular incomes and no sense about how to manage their money. It’s been a cynical ploy by the banking business to get young people hooked on the concept that there’s nothing wrong with running-up a mountain of consumer debt.
Going forward, the only way people under 21 will be able to get a credit card is if they get the approval of a parent, or can show they are financially independent. That’s the way it used to be and the banks never should have been allowed to do otherwise. Hopefully, limiting the flow of cards will produce a generation of young people better schooled in the art of managing their finances.