Dear Opening Credits,
I know the new credit card law means that students under 21 at my college will need co-signers to get credit cards. I'm over 21, and I've been talking to some of these underclassmen who are dying to get cards but don't want their parents to know about them.
My question: How much should I charge to be a co-signer for them? I think this could be a sweet business. -- Seth
Dear Seth,
- The relationship issue. The Credit CARD Act does indeed make it considerably more difficult for anyone under 21 to get a credit card in his or her name only. However, it can be accomplished with a co-signer who is willing to guarantee the account with joint ownership. Whom should that person be? A trusted, trusting individual. You see, if you were to make arrangements with virtual strangers, they could just as easily ruin your credit as you could theirs and not give a hoot about it. After all, what do they care about you and your future? As a co-signer, you are equally responsible for the debt accrued on the card. For this reason, it makes the most sense to have a close association in these types of credit arrangements.
- The credit-report issue. Though it can sound sensible and lucrative for you to co-sign on a steady stream of accounts for a price, the credit card companies would soon tire of your guaranteeing any Tom, Jane and Jo. Sure, you can co-sign on an account for someone you don't know, but your good name will soon wear thin. Open more than a few accounts, and you'll be overextended, which will make your credit scores take a nose dive. At that point, your business will not only dry up, but you'll also have some extensive credit damage to repair.
- The lying issue. Come on, Seth! Do you really want to help other college kids lie to their parents? I can't think of a better way to describe this plan than "morally yucky." We're long past the "greed is good," bend-the-rules mentality of the fabulous (if campy) 1980s movie "Wall Street." Instead, borrowing a title from another classic movie of that era, all Americans need to "Do the Right Thing" when it comes to money and credit. Integrity is really the best approach. It feels good, and it is good.
Another point to consider is that all of your potential customers have another way to obtain cards in their own names without turning to a mercenary co-signer. How? Get jobs. You see, the other stipulation of the CARD Act is that if under-21 applicants have regular incomes, they don't need anyone else to guarantee their accounts. A credit issuer will determine if an applicant has the means to handle a credit card and can grant it based on that information. In fact, I believe this is the best method anyway, because it sets the stage for financial and credit history independence.
Therefore, the answer to your question of how much to charge for your pay-for-plastic service is zero. Don't get me wrong, though. I support the idea of capitalizing on a need and developing a business around it in a creative way, but this venture gets an F.
Keep thinking. I'm sure you'll come up with another -- more ethical and realistic -- way to make money.
Published July 14, 2010
