RICHMOND, VA (WWBT) - You may have seen the offers on college campuses across the country: free mugs or tee-shirts for applying for a credit card. Some schools receive money from credit card companies to let them offer credit cards to students or alumni. Now the rules governing those agreements are about to change.
Many students will tell you they pile up debt after accepting offers for credit cards they receive while they are attending college. Student Jackie Lowe told us, "My parents call me a lot and yell at me, but what are you going to do?"
Lowe admits to charging up some credit card debt. "There's so many good restaurants. I'm always like 'Oh, let's go to Elephant Thai, or let's go to Little Mexico.' I just end up going every night."
Dana Wiggins at the Virginia Poverty Law Center says students can often end up with thousands of dollars in debt they can't afford to pay back. Said Wiggins, "Because many of them have lower paying jobs or some people don't have real jobs at all while they're in school."
Many colleges across the country have affinity agreements with credit card companies, which pay the school or alumni group for allowing them to offer credit cards to students or alumni, through the mail or on campus. Explained Wiggins, "Many students are given mugs or tee-shirts or other kinds of school related paraphernalia."
The University of Richmond says it collects royalties for letting Bank of America offer credit cards to students. The University of Richmond says it is not at liberty to reveal how much it makes, but says it helps to offset tuition.
Virginia Commonwealth University tells us it does not allow credit card companies to solicit current students, but the VCU Alumni Association collects $90,000 a year for letting Bank of America mail credit card offers to alumni only. VCU says alumni can opt-out of receiving the offers.
Virginia State University, Virginia Union University, J. Sargeant Reynolds Community College and John Tyler Community College say they do not have affinity agreements with credit card companies.
New Rules take Effect
But now, as part of the Card Act taking effect in February, the rules regarding affinity agreements are about to change. Credit card companies will no longer be able to give credit to people under age 21 without a co-signer or proof they can make payments. Said Wiggins, "Students 18 to 21 will have to show an ability to repay on a credit card."
Colleges and alumni groups will have to disclose the details of affinity agreements. And credit card companies will not be able to offer free gifts to get students to apply. Those changes may result in less money for credit card companies or schools, less credit available for students who need it, but also may help students avoid debt.
Said student Pam Webb, who tells us she's avoiding credit cards right now, "You'll spend all the money and not realize that you have to pay it all back."
The new credit card rules apply to more than college students. They will also prevent credit card lenders from raising your interest rates on debt you already have unless you're more than 60 days late. Deadlines for payments will be set at 5 p.m., not earlier in the day. You'll have to opt-in to being approved for over-limit transactions, so you won't have to pay over-limit fees if you don't want them. And your payments will go toward your debt with the highest interest rate first, which can help you pay it off faster.