Under 21? The CARD Act Restricts Your Access to Credit

The CARD Act could go into effect as soon as December. Although legislators passed the CARD Act with Americans’ best interests in mind, the act also means credit card users may see higher interest rates and fewer rewards. And for anyone under 21, the CARD Act will make it much more difficult to get a credit card.

The CARD Act’s Under-21 Restrictions

The CARD Act stipulates that creditors are prohibited from extending credit to consumers individuals (I hate the word consumer) unless:

  • the consumer individual has submitted a written application that meets specified requirements and
  • the application is signed by a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer borrower in connection with the account.

What I Think

When I first heard about the under 21 provision in the CARD Act, I said “that’s a great idea”. That’s because I started getting into hot water with credit cards way before my 21st birthday. But as I’ve had some time to chew on the idea, I’m starting to think it stinks.

First of all, I’m not a big fan of the government telling citizens what we can and can’t do.

Secondly, the provision may actually be discriminatory under the Equal Credit Opportunity Act, which is in place to

“…promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract)”.

(I’ll leave that debate for the lawyers).

Most importantly, I do not believe age is the best predictor of responsibility. Some people can manage credit responsibly, others can’t. Some people are in a position to get credit at 18, 19, or 20. Others are not.

I don’t believe, for example, that a full-time college student with little or no personal income should have several credit cards with $28,000 of available credit (which I had at 19). But how can the government tell a 19-year old who works full-time, has his or her own apartment, and may even be getting married, that he or she can’t get a credit card?

Creditors should make decisions on issuing credit based upon

  • a borrower’s prior credit history and
  • his or her means to repay the debt.

The first criterion already makes it hard enough for young people to get credit, why not leave it at that? Meanwhile, credit card companies do not even verify applicants’ income. Why not simply require that they do?

I know first hand that credit cards and college is a dangerous situation, but I really hate the idea of taking away other Americans’ ability to make free choices—regardless of age.

If you’re under 21, you still have time to apply for a credit card on your own before the CARD Act goes into affect. If you do, just be honest with yourself about why you’re getting it. If you’re going to use it responsibly to build credit, great. If you have dreams of financing a trip to Cancun and paying it off after you graduate, take the advice of somebody who made that mistake not so long ago: Don’t.

What do you think? Are the restrictions on issuing credit cards to people under 21 a good idea? More importantly, are they fair? Are they legal?

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


  1. We stumbled over here coming from a different web page and thought I may as well check things out. I like what I see so i am just following you. Look forward to finding out about your web page again.

  2. David Weliver says:

    Thanks for pointing out that clarificition, Mel.

    I must have been looking at an older version of the act when I wrote this because the clause about the financial documentation proving an independent means of repaying the obligation wasn’t in there.

    I’m glad to know it is. It makes this whole part of the act make a lot more sense.

  3. You need to update your facts. The CARD Act actually stipulates:

    Under new Section 127(c)(8)(A) of TILA, as adopted by Section 301 of the Credit Card Act, no credit card may be issued to, or open-end consumer credit plan established by, or on behalf of a consumer, who has not attained the age of 21 unless the consumer has submitted a written application to the card issuer that meets certain requirements. 15 U.S.C. 1637(c)(8)(A). New TILA Section 127(c)(8)(B) further provides that an application to open a credit card account by a consumer who has not attained the age of 21 as of the date of submission of the application shall require either: (1) the signature of a cosigner who has attained the age of 21 having a means to repay debts incurred by the consumer in connection with the
    account, indicating joint liability for debts incurred by the consumer in connection with the account before the consumer has attained the age of 21; or (2) the submission by the consumer of financial information, including through an application, indicating an independent means of repaying any obligation arising from the proposed extension of credit in connection with the account. 15 U.S.C. 1637(c)(8)(B).

    What all the fancy legelese in (2) means is that if that responsible job holding, apartment renting, getting married 19 year old in your example can provide proof of all those claims, they are just as entitled to a card as anyone else.

  4. You are exactly right. Why not have the State’s offer a personal finance/credit card education class with a pass/fail grade in order for younger borrowers to be eligible for a credit card? While even that idea might be a little too far reaching for the government IMO as they already seem like they are trying to control everything anyone ever does even that would make more sense than an arbitrary restriction based on age alone.

  5. Given that I’m just barely 22 I strongly disagree with this limit. I would not have been able to get a credit card until I graduated from college! Often financial aid doesn’t come soon enough to pay for textbooks (for example my graduate school aid arrives during the second week, the school defers tuition until then). This could affect young people’s abilities to get their education. Also, when you’re 18 you haven’t had much time to get an emergency fund together so that card might be the only way to get the car repaired. In addition credit scores are partially based on how long you’ve held an account in good standing, is it fair to harm a young person’s credit score because others were not responsible?

  6. We are of like minds on this one, David! I’ve been railing against this provision in the CARD Act ever since it was announced. I’m sorry, credit history is weighed far too heavily in America today for the government to be restricting young people’s ability to establish it.

    I’m all for education, but I simply have to agree that age is not the best indicator of responsibility. I would be okay with a credit “license” that let you apply for credit after taking an exam, but I’m not sure how much good it would do. It’s like how I studied Unix in a college class just to pass the exam… and then promptly forgot everything!

  7. David Weliver says:

    Both great ideas!

    Protect young borrowers with limits or education, not simply by denying credit based on age alone.

    (As for the education component, I think that state departments of education need to start mandating personal finance in high schools much like they do phys ed.)

  8. At first I thought the age restriction was a good idea. In fact, before the act came into play I often wondered what it would take to get the credit card vendors off the college campuses. I realize now that isn’t the answer (well…maybe part of it).

    You need a license to drive, marry and in some places own a dog! Why not a license to apply for credit? I realize it would not be as easy as it sounds, but at least this way there can be some formal standardized education before putting a credit card in people’s hands.

    I know it won’t solve all the problems, just like people with driver’s licenses still disobey road rules and cause accidents. However, the majority of people on the road know the rules and abide by them.

    Maybe if there was some formal training on financial literacy and responsibility before being allowed to even apply for credit, some people wouldn’t get into financial trouble.

  9. I got a credit card when I turned 18, and since I’ve always been very responsible with money, I didn’t have any problems. I was able to do things like purchase my college textbooks and order things I needed on the internet. I suppose debit cards have eased the need for a credit card but since they offer less protection it’s not a perfect substitute.

    My husband didn’t get a card right when he started college and tried to get one when he turned 21. He got rejected everywhere. He was able to get a card with a $500 limit from the bank he had a savings account in.

    I know it’s hard to assess responsibility without a history, but limit the damage by limiting the credit amount and not a person’s ability to get a card based on age.

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