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Under 21? Credit cards hard to get

For college students, the credit party is coming to an end.

After years of snapping up credit cards with ease, the Credit CARD Act of 2009 will make it much more difficult for anyone under the age of 21 to qualify for a credit card.

Under the new law, which takes effect in February 2010, no one under the age of 21 will be approved for a credit card offer unless a parent or guardian or spouse is willing to co-sign, or the young adult shows proof of sufficient income to cover the credit obligation.

So come February, unless you have a job or a co-signer or you've celebrated that all-important 21st birthday, you won't be able to open a credit card account in your very own name.

The new law also requires credit card companies to significantly cut back on their marketing efforts to college students.

If you're under 21, prescreened credit card offers may not be mailed to you unless you've opted in with the credit reporting agencies to receive such offers. So, no avalanche of credit card offers will be jamming the mailbox in your dorm unless you give the OK.

And you can forget about snapping up a bunch of free gifts from credit card companies as you stroll across campus. Credit card companies will no longer be able to use T-shirts or free pizza or any other tangible gifts to entice students to apply for credit cards on or near campus or at university-sponsored events.

Yep, the credit card party is definitely over. And for many college students that may be a very good thing.

According to a recent study by Sallie Mae, the average amount of debt carried by college cardholders is $3,173. The average number of cards per student is 4.6.

4 options for under-21s
  1. Get a co-signer for a credit card.
  2. Get added as an authorized user on parent's card.
  3. Use a prepaid card.
  4. Use a debit card.

"It's been way too easy to get credit cards if you're a college student," says Bill Hardekopf, chief executive officer of LowCards.com. "Just the fact that the average college student has 4.6 credit cards. I don't have 4.6 credit cards. Why do you need 4.6 credit cards?"

Without a handful of easy-to-come-by solo credit card accounts to fall back on, under-21 college students will need to be more careful with their money choices and their budgeting in the coming months.

Here's a roundup of payment options for college freshmen and sophomores and their parents to consider.

Get a parent or guardian to co-sign for a credit card

Co-signing for a credit card account is a big step for parents and students and should not be taken lightly.

"It's a joint account basically," says Gerri Detweiler, author of "The Ultimate Credit Handbook." "It's joint responsibility."

The credit card account will be listed on the student's and the parent's credit reports. A positive payment history will boost the student's and the parent's credit scores. Likewise, a negative payment history will hurt both the student's and the parent's credit.

"The co-signer runs the risk of hurting their own credit if something goes wrong," says Adam Levin, chairman and founder of Credit.com.

If the credit card becomes delinquent, the collection report would appear on both the student's and the parent's credit reports.

With a co-signed account, it's a good idea for both the student and the parent to keep close tabs on the account. So be sure to sign up for online account access and payment alerts, so you'll both be aware of what's happening with the account at any time.

Worried about the credit line on a co-signed account climbing out of control? Don't be. According to the new law, a credit card company may not increase the credit limit on a co-signed account without the co-signers' written approval. So if a card company wants to double the credit line on the account you share with your son or daughter, they'll need your written approval first.

Once you co-sign for a credit card with a son or daughter, the only way to break the joint credit relationship is to close the card account.

"Sometimes these relationships last longer than expected," Detweiler says. "It's another warning for parents."

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So once a college student is ready and able to manage a credit card account on their own, let them.

Once a student qualifies for a solo credit card account on their own, it's a good idea to close the co-signed account that you share. Make the break and allow your son or daughter to take full responsibility for their credit obligations.

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