Kids, Teens and Credit Cards Are A Bad Mix

Is a credit card a rite of passage to adulthood? Some parents seem to think so.  Financial experts have identified that children, especially teens, have been going credit card crazy. In a misguided effort to provide more for their kids than they really need, parents have strongly encouraged dangerous financial behavior for their children by allowing them free access to plastic.  While there are exceptions, generally speaking, mixing kids or teens with credit cards is a bad mix has generally resulted in profound financial complications for some of these children.

Worried that children do not have access to ready cash, some parents are willing to hand over the cards to permit the tots to have a feeling of security. Take for example the 12 yr old in the UK that racked up the equivalent of $1400 US on Farmville using Mommy’s credit card. Using his entire savings and credit card charges the youth charged around $100 per day to upgrade his status on the social site with houses and get livestock. His mother was not aware that her son was using the card for online purchases. As soon as he was found out, the card was stopped immediately.

His reason for the online shopping spree, “…they brought out good stuff that I wanted”. It is unlikely that the mom will get any of the charges reversed unless she is willing to press criminal charges against her son. With an estimated 83 million active users Farmville is counting on people to buy the new stuff that they bring out.

This pointedly shows that some youths abuse their parents’ generosity and that although parents want to provide for their children, maybe making them aware of the financial responsibility might be more appropriate. It also brings to the forefront the myriad of ways online merchants are vying for the almighty consumer dollar. You don’t even have to leave your house to get access to the largest and widest variety of virtual real estate the world has ever known — networking sites, iTunes, dating hook-ups, games sites, apps and Amazon purchases all accept VISA, MasterCard or other credit card numbers.  Wide open access to these huge online marketplace has led to many problems, especially for the younger generation exposed to credit.

One UK parent has been a bit more lenient with her son’s online purchases. He has open access to his parent’s credit cards for his online purchases. Healthy monthly charges for iTunes and Amazon sometimes surprise this teenagers folks. Monthly charges from $45 to around $120 US seems to shock the parents who try to offset the amount by taking the funds out of his pocket money. “I try to take it out of his pocket money, but maybe I should be stricter with how much he can use my card,” says this teen’s mother.

Prepaid Cards

To help stifle the unauthorized use of credit cards some companies have developed prepaid cards. Designed for the teenage market these cards are a pay-as-you –go type of card where parents can top up the balance rather than handing cash to their child.

What Teens Need to Know

The pain free transaction of the card swipe seems, to a teen, that no money has changed hands. The reality is we will be paying for it later. Convenient, pleasurable and oh so easy to spend, the hard fact is at the end of the month, when the bills come in, the balancing act begins. This is where the teens should begin their credit card education. We have all seen the swipe and PIN at the retail end. How about getting the teens involved at the source end.

According to a study done in 2008, 34.7% of high school seniors had credit cards. Further to this study it found that less than half realized that people who paid only the minimum amount each month would pay more in finance charges than a consumer who paid the full amount every month. When it comes to credit cards, financial expert David Ramsey says, “parents must teach the teenager to just say no.”

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This entry was posted on Friday, May 7th, 2010 at 12:00 pm and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.