By Steve Rosen
Tribune Media Services
January 12, 2009
A few weeks ago, I was asked by an opinion research organization for my thoughts on a new product under consideration -- a "family" credit card that parents and children could use.
It didn't take me long to make my point.
"That's one of the worst ideas I've ever heard of," I told the researcher.
Wait a second, she said. "Would it change your mind if I told you that the card could be a great way to teach children about using credit responsibly? That there would be built-in safeguards to prevent overspending or unauthorized use, and that Mom and Dad would be able to monitor their children's activity?"
I felt the need to repeat myself. "No, no, no. It's still one of the worst ideas I can think of."
Giving your children a credit card is just asking for trouble -- for most kids, a piece of plastic is just a cool way for gaining access to your bank account. Trust me, I didn't hear anything about this "family" credit card being tied into junior's or missy's wallet.
I don't care whether your child is a young teen in middle school or a senior in college. Until they've mastered how to handle cold, hard cash, they are light years away from being responsible enough to handle plastic.
I'm all for teaching youngsters how to use credit responsibly. The number of college students up to their eyeballs in credit-card debt is a sad situation that reflects how easy it is for young people to get overextended at an early age. That's why it's critical to discuss the pros and cons of using credit cards with our children.
The best way to start the process is to let your son or daughter learn to manage cash responsibly. If you give your children an allowance or they have earnings from a job, require them to spend their own money on trips to the mall or for a weekend movie or burgers. Then, as they develop good habits, a debit card on their checking account might be in order so they can tap the ATM for their own money.
That doesn't mean you can't cover some of their expenses, but don't slap a $20 bill -- or the family card -- into their palms every time they head out the door.
Time and again, surveys show that youngsters do a much better job of handling money if theirs is on the line, not yours.
That's what makes this "family" credit card concept a gimmick that I hope gets relegated to the back burner.
Bill Hardekopf doesn't like the idea either. As chief executive of LowCards.com, an online resource that monitors the credit card industry, Hardekopf is well-versed on most every plastic product ever unleashed on consumers.
The family card, however, was news to him.
I asked if putting a teen or young adult on a family card would help him or her manage their finances or make it easier to develop a credit history. Here's what Hardekopf had to say:
"Putting a young adult on a family card would not begin establishing credit for that young adult. One of the greatest things about getting a young adult their own credit card is that they begin to build some credit history and a credit score of their own. This can certainly help them when they graduate college and get out on their own, but putting them on a family card would probably not begin to establish" their own credit identity.
Hardekopf also worried that all members of the family could be negatively affected if something goes wrong with the account. For example, what if your teen charges eight stereo systems to the account and those cannot be paid off?
"With my credit card," he said, "I know my credit limit and have a pretty good idea how much I am charging on the account each month. If everyone in my family is charging things on this one family card, I would probably have no idea if we are exceeding our credit limit.
"And if we do, we'll be charged an over-the-limit fee and our annual percentage rate will almost certainly get increased right away."
OK, I asked Hardekopf, can you see any benefits to this one-card-for-all plan?
"The only positive might be that everyone in a family might be able to have a credit card whereas individually they may not all qualify."
Hardly a ringing endorsement.
To be fair, the opinion researcher who spent 30 minutes with me on the phone didn't share all the details about the plastic product and its safety features, nor did she divulge the name of the credit card company that was testing the waters.
Regardless, the thought of putting plastic into young, inexperienced hands was a discussion stopper for me. Our children will have plenty of time to obtain a credit card by the time they get a job. I'd rather they first rack up some experience using money and learn the various distinctions about plastic and the rules of the game before those first credit cards are slipped into their wallets.
Questions, comments, column ideas? Send an e-mail to srosen(AT)kcstar.com or write to him at The Kansas City Star, 1729 Grand Blvd., Kansas City, MO 64108.
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