Credit Cards Breaking Rules on Campus?

The CARD Act of 2009 banned banks and card issuers from offering credit cards to young adults under the age of 21 unless they have a qualified co-signer or proof of sufficient income to repay the debt - but those rules are apparently being broken, at least around the University of Houston. There, professor Jim Hawkins recently released a survey of 338 students under the age of 21, showing roughly 76% had received a credit card offer since the beginning of 2010. Almost 30% said they had gotten cards by successfully identifying student loans as "income" on the applications.
Also, 47% of freshman reported seeing credit card companies offering tangible gifts on and around campus - another nono of the CARD Act. Here's a reminder: If you're a student, regardless of your age, and someone waves a T-shirt or a shot glass at you to get you to sign up for a credit card on campus, RUN - and file a complaint with your school and local Better Business Bureau since that's no longer allowed.

It's not that young adults are irresponsible and can't handle a credit card. In fact, there's no data that suggests the younger you are, the more debt you are likely to accrue. (Although we do know that prior to the CARD Act, college seniors were graduating with roughly $4,000 in credit card debt, up from $2,900 in 2004, according to Sallie Mae.) But, let's be honest: When you're 21 and don't have a job, how will a credit card benefit you? In theory it should help you establish credit history, which is great for your credit score. In the short term you can charge pizza, your college tuition and maybe even rent. But when the bill arrives later that month will you absolutely be able to pay off the statement on time and in full? If not, skip the credit card. You're not going to do yourself or your credit score any favors when you fall into a cycle of debt.

Even if you do think you are ready for a credit card on your own - and you're of legal age - you should still ask yourself the following 4 questions first:

1. Have I talked to mom and dad? This is not about asking for permission or convincing them to be co-signers. Instead, it's important to discuss your plans with your parents; they may offer some worthy advice. They might be able to help you compare the different card offers or explain the best way to treat your statement each month. They could tell you all the things they wish they knew about credit cards when they were your age. Moreover, when you talk about your intentions with a parent or someone you trust, you end up feeling a bit more accountable for your actions. If you promise to them that having a credit card won't lead you towards a shopping frenzy, that could serve as helpful reinforcement next time you're at the mall.

2. Why do I need a credit card? Mom and/or dad will probably want to know this, too, by the way. Is it for the convenience of paying your bills? For emergencies only? To begin establishing credit so you can buy a car when you graduate? Those are decent reasons to open a card. But be honest: Do you also intend to use it for some big-ticket purchases (a new laptop, perhaps) and want the convenience of paying it back in increments? You might be better off saving up for big purchases, instead. If you get in the habit of using a credit card for "wants," your debt can quickly snowball into thousands of dollars.

3. What if I lose my job? If you lose income, how will you ensure that you don't fall behind on your monthly credit card bill? Do you have savings tucked away somewhere to cover your expenses? If not, you may not be ready for a credit card just yet.

4. Have I shopped around enough for the best card? Or am I settling with the first offer that came in the mail? I would inquire about credit cards at credit unions and local banks, where interest rates tend to be lower. Because you're young and don't have much credit history (if any), your APR (annual percentage rate) will be higher than average. If you pay off the card in full each month, you don't have to worry about interest rates - but as soon as you get stuck making a partial payment, that rate will bite you.

Some top-rated student-oriented cards include the Discover Mix Tape Student Card, which gives you up to 5% cash back on rotating categories - from clothes to gas, travel and dining out. There's also no annual fee or sign-up fee. Then there's the Citi Forward Card: It promotes good behavior, encouraging you to be both responsible and eco-friendly, by offering points for customers who pay on time, stay under their credit limit, and sign up for paperless statements.

More on MoneyWatch:

• 6 Ways to Never Pay an ATM Fee Again
• Should I Save or Pay Down Debt?
• Credit Cards: Steer Clear of Store Credit Cards
• Credit Cards: 5 Rules for New Users
• 5 Biggest College Credit Card Myths