Is Secured the New Card for Those Under 21?

With the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act signed and set to take effect in February 2010, there is one group of people that will have to re-adjust how they will be able to obtain a credit card. Under the new law, those that are under the age of 21 will be required to have a co-signer, pass a financial literacy course, or show that they have the ability to repay amounts that are borrowed. With these guidelines in place there is only one solution that seems to be best for those under 21, a secured credit card.

Secured credit cards for the most part are like any other credit card. The difference is that a secured credit card is one in which the consumers open a card account with a security deposit equal to their credit limit. This deposit, in many accounts could be termed as “proof” that the cardholder has the ability to repay the amount that is borrowed. Also with a secured card there is no need for a cosigner because in the case of someone defaulting, the credit card issuer simply takes the security deposit linked with the card.

Although at the moment secured cards are marketed toward those consumers with bad or not credit history, I do see this changing as we get closer to the beginning of next year. I think that card issuers will see this as an avenue to reach those consumers (under 21) who know that they need credit and that their credit history will affect interest rates in their future.