Final answer:
The Credit Card Act of 2009 requires individuals under 21 to have a co-signer or sufficient income to obtain a credit card. The law aimed to curb the high levels of credit card debt and prevent the financial hardships that followed the subprime mortgage crisis.
Step-by-step explanation:
According to the Credit Card Act of 2009, credit cards cannot be issued to people under the age of 21 unless they have an adult co-signer or can show proof that they have enough income. This law was part of a suite of reforms introduced to protect consumers, particularly young adults, from getting into unsustainable debt. The economic context of the time saw many consumers extending themselves on credit, with credit card debt reaching over $1 trillion due to low interest rates and aggressive lending practices. Financial institutions were also offering high-risk, high-interest loans known as subprime mortgages, often to individuals who did not fully understand the terms or lack the ability to make the payments, which contributed to the financial crisis of 2007-2008.
Paying only the minimum on credit card debt, exemplified by the hypothetical scenario of two friends with $2,000 in debt making minimum payments, highlights how difficult it can be to pay off debt. One friend pays slightly more, adding an additional $10 each month, which can significantly reduce the time and total interest paid over time.