Money Smart Kids
Kids and Credit Cards Don't Mix
Giving your teens credit cards is like letting them use drugs early so that they won't turn into addicts. I'm all for learning to use credit responsibly, but having a card to practice on isn't the way to do it.
By Janet Bodnar, Editor, Kiplinger's Personal Finance
February 17, 2005
Not long ago, I was asked to appear on a TV show to discuss whether youngsters should carry credit cards. "What's to discuss?" I asked the producer. "That's the dumbest idea I've ever heard."
Not so fast, I was told. Some people think that if kids use credit cards while they're still at home being watched by their parents, they will handle credit responsibly when they're on their own.
I repeat: It's the dumbest idea I've ever heard.
Giving your teens credit cards is like letting them use drugs early so that they won't turn into addicts. I'm all for learning to use credit responsibly, but having a card to practice on isn't the way to do it.
The best way to teach kids to manage credit is to have them start with cold, hard cash -- "cold" and "hard" being the operative words. Spending money is more real to kids when they have to count out the bills and look down into an empty wallet. As my 16-year-old son puts it, "If I don't have cash, I can't buy stuff I don't need. If I have a credit card, I can buy anything."
That's what makes a new marketing gimmick like the Hello Kitty Debit MasterCard so insidious. Like the Visa Buxx card, Hello Kitty is a prepaid card aimed at children. Parents are encouraged to get the card for girls as young as 10 and reload it when it's empty.
The card, which is loaded with fees, can be used to make purchases or get cash out of an ATM. Purchases can be tracked online, and pushers of this plastic promote it as a way to help kids manage finances.
But, trust me, kids won't get it. To them, plastic is magic money. Credit cards, debit cards, prepaid cards -- you name it, they're all just a direct line to Mom and Dad's wallet.
Referring to the Visa Buxx card, one young woman once asked me where she could get "the card that my parents can fill up when the money runs out." In one survey, 35% of teens said having a prepaid cash card would make them "look cooler in front of their friends."
What card issuers really want to do is get plastic into little hands so kids can buy stuff. Hello Kitty, in fact, bills itself as the "cutest way to shop."