In years past, college students could pick up new credit cards like bags of potato chips. Since Feb. 22, 2010, however, getting a credit card under the age of 21 hasn't been as easy. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 prevents credit card issuers from issuing cards to underage consumers unless the applicant has a co-signer or can show "an independent means of repaying any obligation."
For young adults without jobs or assets, co-signing or becoming an authorized user on a parent or guardian's account is the only way to obtain a credit card in their own name. Co-signing differs from sharing an account with an authorized user in that both parties are jointly liable for repayment, while an authorized user isn't legally responsible for the debt.
Not all issuers allow co-signingDespite the fact that co-signing is one of the only ways for young consumers to obtain a credit card, not every card issuer allows consumers to apply with a guarantor. Bankrate.com surveyed some of the largest card issuers and found that some simply don't permit co-signing.
A couple of issuers have begun disclosing upfront in student credit card solicitations that a co-signer is required by law in lieu of individual ability to pay. Bank of America and Discover started including this disclosure with mailed offers in the first quarter of 2010, says Anuj Shahani, director of competitive tracking services at Synovate, a firm that monitors credit card mailings.
Why doesn't every issuer accept co-signed accounts? Some institutions might be reluctant to deal with "the logistics" of servicing joint accounts, says Dennis Moroney, research director of bank cards at TowerGroup in Needham, Mass. With authorized users, he says, "there's no question about who owns the debt."
Which credit card issuers allow co-signing?
|American Express||No||The parent or guardian can add their child as an authorized user, though. The primary card holder can use the "Custom Limits" feature to cap monthly spending on the young person's card.|
|Bank of America||Yes||After qualifying, the parent or guardian could add the adult under 21 years of age to the account. "And a co-signer can be added to any credit card account," says spokeswoman Betty Riess.|
|Capital One||No||Co-signer accounts are not offered. "We're offering accounts to consumers under 21 based on means to independently pay," says spokeswoman Pam Girardo.|
|Chase||Yes||"Once the account is booked, a customer can request to add a joint account holder, but there is no option to do so on the new account application," says spokeswoman Gail Hurdis.|
|Citi||No||Citi offers student credit cards where "no co-signer is required" -- meaning you need to have the ability to pay. "Citi does not offer a co-signer credit card for college students," says spokesman Samuel Wang.|
|Discover||Yes||"Once we review the application, we will determine if they need a co-signer and then send them a notice," says spokesman Matt Towson.|
|Wells Fargo||Yes||"Per the CARD Act, applicants under 21 must submit written applications and their signatures and that of their co-applicant's must also be captured," says spokeswoman Lisa Westermann.|
Check with the card issuerMost people under 21 years of age can qualify for a credit card without a co-signer, says Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association.
"So many people under 21 have part-time jobs or assets. They work during the summer, earn money, and so, would therefore be eligible for a card," she says.
When co-signing is the likelier route, call ahead to the bank or credit union before applying to find out what the process involves. It may be a matter of submitting an application and letting the issuer decide whether a co-signer is necessary.
"If they do not qualify for the Visa with their income, then we can offer them a Visa with a co-signer," says Suzie Hagardt, lending manager at Rivermark Community Credit Union, in reference to applicants younger than 21. "Then we would just take the information from the co-signer and qualify them."
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