As soon as I was 18, I couldn’t wait to do two things: buy a lottery ticket and get my own credit card. I lost my first $10 and gave up on the former, but I didn’t even have to try to get the latter. I got a phone call merely a few weeks after my birthday with a survey from a credit card company — they wanted to issue me my own card. Ten minutes on the phone and one week later, I had that little piece of plastic magic in my hand — and a whole new mess of troubles.

With six months of 0% APR and an increasing spending limit, I went on a charging rampage for four months and then struggled my last two to pay it off. After that, I just signed up for another one. And the vicious cycle continued until I ended up with five different credit cards and a balance on each. Now, four credit cards lighter and (almost) debt-free, I’m just glad I didn’t ruin my credit score because I paid my bills on time.  I’m certainly never digging myself into that hole again. But, could my spending problems have been prevented? The government thinks so.

In February, a federal law will be passed requiring all those under 21 to have either a parent co-sign or require teens to prove they can prepay their debt.

Like most good things in life, credit cards can do us good or bad. So will the limitation help or hinder? According to Ken Lin of Credit Karma, this limitation could just keep young adults from building credit. Credit Karma helps you calculate and track your credit score in order to gain access to exclusive offers from companies that “value your creditworthiness.” In order to calculate credit score, payment history and the length of access are considered. By pushing the age required to get an unlimited card to 21, the process is just getting delayed “limiting the data available to build a good or excellent credit score” and even keeping some from getting auto or mortgage loans, according to Lin.

Avi Karnani, the founder of Thrive, a company directed to helping adults in their 20s and 30s learn to control and manage their finances, finds credit cards a pathway to disaster. According to Karnani, young adults who are not educated in financial responsibility can easily destroy their credit and lead themselves to years of debt payment. But with the average college student graduating with $3,100 in credit card debt according to Credit Karma, “there’s no point in building credit and then trashing it,” Karnani said.

So instead of handing an 18-year-old a card that allows him to spend money he might not have and lead him into whirlpool of debt, why not teach him how to use credit responsibly. Karnani compares it to getting a driver’s license. There are learner’s permits that allow driving with limitations. Then, there’s driver’s education and tests that one must pass before he’s given full license over the vehicle. That’s “exactly what we’re doing here with credit,” Karnani said.

Is involving a parent’s signature and putting his/her credit on the line a good idea? It can work both ways. It can seem like just another restriction on the freedoms of young people. First, no drinking. Now, no credit cards. It can also work against the co-signing parent. “When co-signing for a child, the parent becomes liable,” Lin said. So, if a child misses or defaults on a payment, it reflects negatively on the parent’s credit score.

On the other hand, the co-signing parent could use it as an opportunity to get involved with their child’s spending and teach them how to use credit responsibly. “Parents need to sit down with their child and discuss the importance of good credit and the ramification of ruining [it] while you are young,” Lin said.

The other option is a prepaid credit card. This is a good choice for those who have a tendency to splurge or trouble remembering to pay bills on time. However, activity of prepaid cards isn’t reported to the credit bureaus so no credit history is built, Lin said.

But no credit has to be better than bad credit. “We’re looking at 20 years of tragedy brought on by credit, and we’re making some rules,” Karnani said. “People will be better off for it.”

Although Lin disagrees with the idea of delaying the building of credit history for 3 more years, he agrees that “having a safety net in the form of a parent for the first few years is a good idea.” As are spending limits. A “good” limit, according to Lin, is one that can be paid back within 3-6 months based on income, not exceeding 30% of annual income.

Lin also suggests that a credit class for students who do not have co-signers is something for future credit card legislation to consider.

As it seems, credit card overspending for young adults will hopefully come to an end. And it will leave college students considering: to charge, or not to charge? That is the question.

Photo credit: DartVader