What’s With All The Hoopla and Credit Card Cosigners?
It’s not so easy for college students to obtain a credit card anymore. While students used to be able to get them with little to no hassle, the Credit CARD Act of 2009 has made the requirements for obtaining a credit card a bit stricter for applicants under the age of 21. Now, college students can only get a credit card if a parent or guardian is willing to cosign, or if the student has a job with an income sufficient to pay credit obligations. Of course, if the student is over 21 these restrictions do not apply.
While cosigning with a parent or guardian may seem like the easiest option, it is also important to keep in mind that not all banks permit cosigners. Bank of America, Chase Bank, Wells Fargo, and Discover all offer the option to cosign, but American Express, Citibank, and Capital One do not have that option.
If you are unable to cosign on an account, most lenders do provide the option to add authorized users to the account. Both cosigning and being an authorized user will allow a college student access to a line of credit, but they do differ in terms of who owns the debt. On an account with a cosigner, both parties are equally responsible for any debt incurred. On an account with an authorized user, only the account holder is responsible for the debt. If you are able to cosign on an account, the only way to be removed as a cosigner is to close the account. Authorized users can be removed from an account at any time without closing the account.
If you would rather just demonstrate to the lender that you have sufficient income to pay your credit obligations, it is important to know that “sufficient income” varies from person to person and lender to lender. The lender will estimate your income based on information from your credit card application, your credit report, employment information, and IRS databases. If they do choose to offer you credit, your credit limit will also be influenced by this information.
While there are now a few extra hoops to jump through on the way to getting a credit card if you’re under 21, it is still possible to get one. The Credit CARD Act was designed to keep you from accruing debt you can’t afford to pay off. Learning how to manage credit card debt now will make essential purchases like a home and a car easier and less expensive in the future.
Originally published at mumoneymatters.tumblr.com.