With phrases like “variable rates,” “annual percentage rate” and “minimum finance charge,” students can become confused when applying for a credit card, making it easier to get into trouble.

On Nov. 28, Sen. Ron Wyden, D-Ore., proposed a way to ease the confusion. The Credit Card Safety Star Act of 2007 would allow the Federal Reserve System to rate credit cards on a scale of one to five stars, with five being the safest for customers.

Credit card companies that raise interest rates without informing customers might receive a one-star rating – more stars means less risk for consumers.

In a press release about the proposal, Wyden said he believes confusing credit card agreements can disguise requirements that result in higher payments and fees.

Family social science professor Catherine Solheim, who teaches about credit management, said the proposal would be another piece of helpful information for students when deciding which credit card to apply for.

“One of the things I talk to students about is reading the fine print of credit card agreements,” she said. “But to be honest, I know a lot of students don’t.”

Journalism senior Dan Schmidt said he currently has two credit cards.

“I got a few credit cards in the mail because the offers seemed good,” he said.

Schmidt said, however, he carries a balance on his cards every month.

If the proposal passes, the Federal Reserve, the United States’ central bank that regulates financial institutions, would help customers by providing their viewpoint in determining credit card disclosures, Solheim said.

“It would be like consumer reports for cars, but for credit cards,” she said.

John Hall, spokesman for the American Bankers Association in Washington, D.C., said although the proposal is “an interesting idea,” he has some doubts.

“We feel this proposal may be premature because the Fed Reserve is undergoing a two- year project to improve the regulations that banks must obey regarding disclosure of credit card terms and fees and rates,” he said.

Credit card disclosures are typically full of legal jargon, Hall said, because banks’ lawyers recommend they follow the regulations set by the Federal Reserve “to the letter” so they aren’t legally responsible for any problems. He said if the Federal Reserve changes the regulations, disclosures might become less confusing.

Objectivity is another problem Hall said he has with the proposal.

“How do you rate a credit card from one to five stars without being subjective?” he said.

Jim Kroening, director of Stillwater-based FamilyMeans Consumer Credit Counseling Service, said while credit card agreements have become more user friendly in the past few years, they remain confusing to most people.

One positive change to disclosures was the “Schumer box” regulation, he said, which Congress passed in 2004 and requires all credit card applications to display important information, like basic fees and rates, in a box consumers can see easily.

Kroening said, however, that he’s not sure if Wyden’s proposal will have a significant effect.

He said in his 15 years as the director of FamilyMeans, this past October was the company’s busiest month; the number of clients who were “swimming” in debt increased, he said.

Higher fuel costs and an increase in adjustable-rate mortgage loan rates are two reasons people are accumulating more debt, he said.

“It’s a really tough situation people are in now,” Kroening said.

Accumulating credit card debt while in college isn’t a wise decision, he said. After graduation, when school loan payments are due and graduates have other monthly payments to make, it’s easy to become overwhelmed, Kroening said.

Biochemistry sophomore Kari Kummer said repaying loans after graduation isn’t something she worries about because her parents will be able to help her repay student loans. She said she doesn’t have any credit cards.

“I am also going into a field where I won’t have to worry about my finances,” Kaumer said.

Solheim said students need to conscientiously manage their debt and not ignore that it is growing, because it can be hard to repair that damage.

“If it goes to support a lifestyle that you can’t support otherwise, you should think of cutting back on your spending,” she said.