An act aims to prevent college students and young Americans from amassing loads of credit card debt.

The Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act for short, went into effect Feb. 22.

Most importantly for college students, the Credit CARD Act forces applicants younger than 21 to have a co-signer, who is older than 21, sign for the credit account or prove they have the income that can pay off any future debt.

The Credit CARD Act also limits the ability of banks to market credit cards on college campuses. Credit card companies who offer gifts, such as a free hat or T-shirt for signing up cannot do so within 1,000 feet of campus.

K.C. Chen, chair of the Finance and Business Law Department, said these provisions will benefit college students and young Americans overall.

“The requirement of a co-signer for adults younger than 21 years old is a great idea that will reduce the delinquent rate and make young adults be more financially responsible,” Chen said. “I cannot think of one negative on this regulation.”

However, Chen acknowledges that these provisions will certainly not put an end to students irresponsibly piling up debt if young people do not control their spending.

“Owing credit card debt is very expensive because the interest rates charged by the credit card issuers are normally very high,” Chen said. “Compounding at a double-digit interest rate on the existing credit card balance will deepen youngsters’ financial woes.”

Fresno State student Jason Panganiban, 22, believes these new regulations will help keep students safe from the ire of credit card companies.

“I think it’s a good idea, because when you’re 18 you don’t know everything about credit cards,” Panganiban said. “I know when I first got my credit cards I didn’t read the fine print and know all the rules. Hopefully it will keep young kids from getting into trouble with credit cards.”

Panganiban has also seen the powers credit card companies have when offering free gifts on a college campus.

“It’s good they can’t market on campus anymore,” Panganiban said. “I know when my cousins went to college they signed up for a bunch of credit cards just to get the free stuff.”

James Highsmith, professor emeritus of finance and business law, said the Credit CARD Act will prevent reckless students from piling up debt, but may also preclude responsible students from building up essential credit.

“This Act may make it a little more difficult for young adults to get credit cards,” Highsmith said. “Many of these people are not prepared to handle credit in a responsible way, while many under 21 have adult responsibilities that make credit useful in navigating everyday life such as renting an apartment [or] getting a job.”

Highsmith joked about the idea that many college students should be forced to go through a course that will help develop their life skills.

“It could be called ‘Wisdom Without Pain’ or ‘What’s Really Up.’ You would not pay for it unless you didn’t earn at least a B,” Highsmith said. “Yes, I know I’m a dreamer.”

Highsmith also said that banning credit card companies from offering free gifts for signing up for a new line of credit will have little effect on student credit debt.

“The T-shirt or other tangible item only serves to attract the student to listen to the pitch of the salespeople,” Highsmith said. “Salesmen can be very persuasive as there is no doubt it makes sense to establish a good credit rating in the U.S.”

Highsmith said the best way for college students to build up good credit is by offering them low-limit, low-interest credit cards where the issuer provides special protections for the cardholder. However, Highsmith highly doubts we will ever see this in America.

“I don’t think you will find this very often in the market because it does not serve the profit interest of the issuer,” Highsmith said. “So much for developing goodwill with your customers.”

Highsmith said that while this act may not change the world, it is making a step toward protecting vulnerable college students.

“It is hard to tell whether the act will significantly curtail the issuance of cards to people under 21,” Highsmith said. “If it prevents only a few unqualified young people from being handed a card that could lead them to credit trouble, costly penalty fees, overage charges, high interest rates and bankruptcy, the act serves a useful purpose.”