New law will make it harder to get a credit card

No more free T-shirts … at least not from credit card companies.

That’s because the Credit Card Act of 2009 prohibits this and other strategies used to get college students to sign up for credit cards.

The act, which will go into full effect in February, will also make it harder for people younger than 21 to get a credit card.

“The law is a very fundamental overhaul of the entire industry,” said Peter Garuccio, a spokesman for the American Bankers’ Association, which oversees the credit card industry. “It’s difficult to guess what is going to happen in the industry once this goes into effect.”

Some parts of the act are already being enforced, including a portion stating that companies must mail credit card bills no later than 21 days before they’re due.

The law bans credit card companies from offering “any tangible item” — including hats and T-shirts — in exchange for a signature on a credit card application and requires companies to get administrators’ approval before marketing on a college campus.

“In the past, we gave out small give-away items,” Betty Riess, a spokeswoman for Bank of America, said. “Currently our policy is to not give out gifts with credit card applications.”

But the law’s new restrictions don’t stop there. One portion of it laid out new regulations for young consumers, saying that people 20 and younger will have to either have someone older than 21 co-sign their cards or provide proof of “independent means,” basically show that they can pay off a credit card balance in full on their own.

The Federal Reserve will determine what constitutes the “independent means” required to apply for a credit card, Garuccio said. The Federal Reserve will determine a number of other rules that govern credit under this law as well.

When the act goes into effect, applying for a credit card will take much more time than previously, said Bill Hazelton, managing director and co-founder of Creditcardassist.com, which helps people compare different cards.

Hazelton said, “Getting parents as co-signers alone may take days. Getting a credit card won’t be instant anymore.”

“It will be much more difficult for credit-worthy customers to gain access to credit,” he added. “That’s a big negative. It’s like throwing the baby out with the bathwater.”

Still, he said, “This is long overdue. The culture of the country needed a stopgap measure from where it was going.”

He added that this act, along with the bad economy will make it much more difficult for people younger than 21 to be approved for even introductory cards.

Garuccio said, “A lot of banks even now won’t issue a card to a young person without a co-signer anyway.”

In light of the act, Discover is stepping up its efforts to educate students about debt management, said one of the company’s spokeswomen, Mai Lee Ua. The student loans area of the Discover website has features such as a financial terms glossary and a series of “Borrow Smart” videos.

Some students thought the ban of gifts in return for credit cards was a good move.

Katelyn Annett, a junior majoring in social work, said, “We should be smart enough to not be tricked by a T-shirt, but that’s not always true.”

Annett has two credit cards, both co-signed by her parents.

“I don’t think it’s a bad idea to make people prove that they can pay off the credit cards,” she said.

The Student Monitor survey of 2008, which tracks how students use financial services, found that 4 percent of students applied for a credit card at an on-campus display or company event, and 6 percent including off campus events, where gifts were most commonly distributed.