Legislation like the Credit CARD Act may protect you from exorbitant fees, bait-and-switch marketing and sudden increase in your interest rate, but who will protect you from rampant spending, irresponsible borrowing and living beyond your means? You, that’s who. With the credit card industry duly restricted by the recent CARD Act, it’s easy to forget that we are often guilty of hurting the ones we love with our credit cards. So, the big lenders are begrudgingly shouldering their punishments for an era of irresponsible credit – how can you do your part? For one, you can get certified.

Credit When Credit is Due

A San Diego-based non-profit known as the Institute of Consumer Financial Education is rolling out a web-enabled version of its Credit When Credit is Due (CWCID) program which is aimed at educating uninitiated borrowers on the pitfalls of credit. Successful completion of the program (which, perhaps coincidentally, has 12 lessons) yields a notation in a national database and a card certifying that you have graduated from the program. Topics span areas such as budgeting, financing a home or a car, applying for credit, recognizing a problem and rebuilding poor credit.

Perks for Certs?

So what’s the point of becoming a card-carrying CWCID graduate? The main benefit, of course, is the education about credit card use and a realistic walk-through of the borrowing process. But another perk that CWCD is pitching is the potential for an increased credit score.

Naturally, your score will see a significant uptick once you start putting your credit education into practice. But the Institute also states that notification of your CWCID graduate status “may be sent to credit reporting agencies and presented to potential lenders.” This, in theory, is supposed to be like a vote of confidence – the hallmark of a responsible, educated lender.

On the one hand, the notion seems very logical. In a way, it would help lenders identify borrowers who have taken time to learn responsible ways to use a credit card and would thus then be less likely to default. It’s sort of like the driving classes or anger management classes that the court may force you to take as part of your sentence.

But in practice, it’s hard to tell if CWCID is actually legitimate and respected within the industry. Given their relatively low profile and .com address, it’s likely that they don’t have much sway or authority, in spite of it being backed by a non-profit. When you visit the incentives section of their website (which is split up into different pages for mortgages, banks and credit unions, utility companies, and other companies), you see a medium-sized list of institutions that offer discounts for CWCID grads. These include:

• Up to 1% off loan rates
• Shots at scholarships
• Waived membership fees
• Cash rebates after loans are closed
• Waived deposits
• Complimentary consultations

None of the participating firms are nationwide banks – though some individual branches do appear on the list (for example, a couple Wells Fargos in South Dakota). Some of the perks would easily recoup the $40 enrollment fee that CWCID charges, but then again, you may be able to get such competitive offers and fee waivers simply by shopping around (or being a AAA member or something). In the end, it seems that the participating institutions – who receive a fair amount of promotion to CWCID grads – may benefit more than the purported 72,500 enrollees and counting.

Education Benefits

Still, I’m hesitant to write off programs like CWCID completely. After all, lack of credit education is by far more dangerous than an adjustable interest rate credit card. But you can just as easily learn about the pitfalls of things like cash advance checks and zero percent deferred financing for free from any number of personal finance blogs (like the one you’re reading, for example).  Any auto-didact with the initiative and discipline to complete the 12-step course from CWIDC on his or her own is unlikely to fall into the subset of those who don’t read the fine print on their credit card terms and can’t remember the date when their bills are due.

The consumers to which credit education institutions most need to be reaching out  are those that don’t bother to seek out ways to spend responsibly, and thus don’t practice healthy borrowing habits. There is a pervasive, seductive force that bids us to buy now and pay later, live in the moment and consume to our heart’s desire (it’s called TV, the media, and the American dream). But where is the message that asks us to think twice about using our plastic? Perhaps this is an extreme measure, but might our society benefit from some requisite form of credit education before allowing you to take out a loan? Just as banks need a license to lend, perhaps shouldn’t the consumer require a license to borrow? How about a couple financial literacy courses taught to seniors in high school? Or a simple math test on compounding interest and the costs of carrying a balance over time? Or anything that forces consumers to at least consider the darker side of credit before diving in.

What are your thoughts? Have you enrolled in a credit education course on your own or as part of a credit counseling program? Would you? Let us know in the comments.

Photo by d3_dan

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