Grads find credit cards hard to get

Getting a credit card used to be easy for college students, probably too easy.

Companies would set up booths on college campuses -- sometimes even in the student unions -- and give students high-interest credit cards even if they didn't have a job and no apparent way to make the monthly payments.

It's no surprise that students would graduate from college with $10,000 or more of credit card debt to go with all their student loan debt.

The Credit Card Act of 2009 made it more difficult for students without full-time jobs to get a credit card. The federal law has helped reduce the number of students graduating with a load of credit card debt, said Mary Beth Pinto, professor of marketing at Penn State Behrend.

But the law also created a new problem: Many graduates now can't qualify for a credit card.

"Credit cards simply aren't as easy to get," said Pinto, founder of the Center for Credit and Consumer Research at Behrend. "If you don't have a history of income, you might get declined even if you have a full-time job."

Getting a credit card is important to college graduates for several reasons, Pinto said.

Many of them are moving for their first job and need to buy furniture for a new apartment, or must rent a car or book a plane trip.

"I don't see how you can function in our society without a credit card, especially when buying things online," Pinto said. "You can use a debit card, but do you want to give these businesses access to your checking account?"

There are two solutions for students/graduates who can't get a credit card on their own.

One solution is for his or her parents to cosign for a credit card, Pinto said. The problem is that if the student/graduate falls behind on the monthly payments, it becomes the parents' responsibility and can affect their credit ratings.

A better option, Pinto said, is a secured credit card. It's a credit card that requires a cash deposit as collateral.

"It's what we did for our son," Pinto said. "We deposited $500 and that became his credit line."

You use a secured credit card just like a regular credit card. The deposit is tapped only if the student/graduate doesn't make the monthly payment.

Parents can add to the deposit to increase credit, and some secured cards increase credit for good payments without requiring an additional deposit.

There are a few drawbacks: The user's credit is limited, at least initially, to the amount deposited. Most companies charge annual fees.

"You need to shop around," Pinto said. "Go to your credit union or bank and inquire there."

Getting a regular credit card should be easy once the user builds his or her credit history.