Hungry For Pizza, But Hold The Debt

For those reluctant to let go of the holidays, fear not. Your credit cards will keep the season’s spirit revolving for as long as you can afford it — and probably a little longer. A congressional study found last March that revolving consumer debt, consisting almost exclusively of credit card debt, amounted to $950 billion, which is more than what Congress wants to spend on health care over the next ten years. In the fourth quarter of 2008 the cost of servicing this debt chewed up 13.9 percent of consumer disposable income. In households of young adults, 24 percent of disposable income is spent on debt payments.

This week, The Wall Street Journal reported that personal bankruptcy filings rose by nearly a third in 2009, indicating that more and more Americans are letting their personal indebtedness outpace their ability to ever pay up. And young people, living on entry-level incomes when they can find work and by the grace of their parents or friends when they cannot, are particularly vulnerable to the siren call of the credit card.

That is why we welcome Connecticut’s new restrictions on financial institutions marketing credit cards to college students. The new law, which took effect January 1, imposes strict new rules on credit card marketers who have been attracting the attention — and business — of college kids at sporting events, student orientations, and course registration sessions by offering pizza, free T-shirts, and other trivial incentives. Connecticut joins 15 other states in restricting or eliminating practices that induce young people, who are often financially naïve, to sign on to credit agreements they do not fully understand.

The new state law anticipates the federal 2009 Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which takes effect February 22 nationwide. The federal law, among many other needed reforms, will require persons under the age of 21 to have a parent or older spouse or other adult co-sign credit agreements, bringing a little more deliberation to the process. One should not tread lightly across the threshold of indebtedness simply because of a craving for pizza. The craving will pass, but for many young people the debt hangs around for a very long time.