One of the better provisions in the forthcoming credit-card reform legislation is a push to making it harder for students to get potentially ruinous access to too much credit. As you might suspect, the credit-card industry is looking for ways around that, and one trick it's come up with is bringing back co-signed credit cards.
According to this article, Discover is launching a co-signed credit card that will be available by the time the credit-card reform provisions kick in, and Capital One is also considering rolling one out. Four other major banks queried offered only a "no comment" in response to the question; a finance-industry trade group spokesperson suggested that many banks will consider co-signed cards in the near future if they're not already.
As cards go, co-signed cards are a whoppingly poor idea. In a nutshell, the co-signer doesn't get to use the card, but he or she is the one responsible if the person whose name is on the card flakes out and doesn't make their payments.
Imagine having to scarf down someone else's wilted green beans at Christmas dinner; in return, they get to eat all of your pie. If it sounds like a raw deal, it is. Nearly every reputable consumer-credit advocacy group advises consumers to run, not walk, away from this option.
So why are credit-card issuers bringing back these turkeys? It's simple: they're taking advantage of a provision in the reform legislation that allows students much greater access to credit if they have a co-signer. Chances are, they're banking on parents' inability to say "no" to a gotta-have-it generation of kids. The CreditCards.com article linked to above quotes a consumer advocacy group director who predicts that more credit-card companies will look to co-signed cards as a way to sign up riskier customers -- and make sure that someone's checkbook is on the hook for the payments.
Parents, what's your reaction to this? Would you let your college-aged kid get a card for which you'd ultimately be responsible? Do you think a co-signed card will help them learn to manage their money or just create more temptation for them to overspend? Is it fair for companies to pitch these cards to kids and make their parents be the gatekeepers?
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