Kids and Credit Cards - The Conversation Continues
March 31st, 2008 by Ana
Last week I posted about kids and credit cards and asked Who is to blame? This was in response to a comment left on my post about a reader’s 12 year old daughter getting credit card offers where I was taken to task for blaming the banks and credit card companies for my (our) mistakes. That’s what I love about blogging with open comments: y’all can make me think and rethink things. (Just remember the comment policy is still in effect.)
The other beautiful part of blogging is other bloggers can join in, and some have:
- CleverDude wrote a massive post on how he thinks it is first the parents’ responsibility to educate their children, then once the child has reached adulthood it then becomes strictly personal responsibility.
- LJ from Mommy Gets Paid thinks the credit card companies know exactly what they are doing when they raise the college kids’ limits to ridiculous levels. They did it to her, and her parents helped her out. (Mine didn’t.)
- Ryan from Millionaire Money Habits says college kids are just too impulsive and truly need a plan before they ever step foot on campus. While I may not completely agree with his plan, it’s still better than no plan at all.
- CindyS from Oh My Aching Debts supports personal finance classes in the schools, since her parents didn’t teach her about money. Judging from the economic news nowadays, I’d say a lot of adults in America didn’t get financial education from their parents.
Perhaps the best response to the question I posed can’t be linked to. Lara92 from MyTMMO board says there is enough “blame” to go around and touch all parties involved.
- It starts at home. Parents should include things like budgeting, paying bills, and managing reasonable levels of credit on the list of “must teach” to their children. I don’t think any parents simply hands a teenager the keys to the family car and says, “Go figure it out on your own,” so why do we do this with money?
- Once a person is an adult, they have the responsibility to keep learning and discovering better ways (or the tried-and-true ways) of how to manage their personal finances. No one will look after YOU better than YOU.
- The banks and credit card companies are not blameless here. They intentionally target college kids, and some have engaged in kiddie branding tactics. They intentionally write their terms for credit cards in legal double-speak, so badly that Professor Elizabeth Warren of Harvard Law School said (in the excellent Frontline special about credit cards, part 3) a graduate level contract law class of hers could not agree on what a credit card companies “disclosure” actually said. They often use dirty tricks to hit you with fees and can change the terms at any time.
- Schools should teach at least a basic personal finance class. We teach kids everything else in school, why is this neglected? Perhaps the most comprehensive suggestion I came across recently was proposed by a college student in a guest post at Blueprint for Financial Prosperity. I’m not sure that plan will fly, but even just a budgeting and how to deal with credit class would go a long way for future generations.
This post probably doesn’t clear much up for anyone LOL It doesn’t for me. This is a massive problem, especially here in America right now. We have at least three generations of adults who seem to have problems managing their personal finances! (That’s a generalization, I know there are quite a few individuals who can.)
With so many different factors involved in identifying the cause of the problem, how are we going to figure out and agree on a solution?
Posted in college, credit cards |
March 31st, 2008 at 1:27 pm
I think that the economy over the next few years is going to teach that lesson to quite a few people. Do you have relatives that lived through the Great Depression? It made a whole generation of people into savers. And yes, I do put a good share of the blame on the companies who issue credit cards. Years ago my older kids BOTH came home with Sears credit cards. They got talked into applying for the discount and got approved in the store. Both were under 18 at the time.
March 31st, 2008 at 1:31 pm
Cindy, I have to ask the obvious: HOW could they sign up when not of legal age??? Minors cannot enter into contracts, and a credit card use agreement is a contract.
March 31st, 2008 at 1:41 pm
You know that and I know that but apparently Sears didn’t care. In Virginia, they can enter into a contract but it is a “voidable” contract. I called Sears and pointed out to them that the kids did not have to pay bills but they didn’t much care. That was when we had our first discussion about credit.
March 31st, 2008 at 1:47 pm
Nice roundup Ana.
thanks for keeping up with this.
I think my daughter signed up for something that was targeted towards High School students.
Today she recieved a few pieces of mail from dress and formal wear shops regarding her Prom Dress.
This is about 4 years too early.
We are going to check into it and have a discussion about entering her name in drawings.
March 31st, 2008 at 2:28 pm
When it comes to credit cards, I wouldn’t blame the credit card companies. Sure, there are some points where a card company may give you TOO much credit but it’s the consumers responsibility to spend what they can afford.
When it comes to a child, you’re right. They need discipline and a lot of it!
March 31st, 2008 at 2:35 pm
“When it comes to a child, you’re right. They need discipline and a lot of it!”
Tom, I find it ironic you would say that, but your link leads to a site called “find college (credit) cards.” The college kids (traditional students straight from high school) are still kids, no matter what they say.
March 31st, 2008 at 7:41 pm
last night I read an anecdote in a book about a mother who panicked when she realized that her 2-1/2 year old son had run out of the house when he heard the music from the ice-cream truck going by …
… she ran after him and saw him running towards the truck with her credit card in his hand!
Now, that’s a ’success story’ for the credit card company :))
March 31st, 2008 at 8:02 pm
AJ, I am not sure whether I want to laugh or cry at that story…!
April 1st, 2008 at 11:11 pm
Of course, ultimately we are all responsible for our financial practice. And those who better prepare their kids for the challenges of personal financial management might have a better chance.
However, the game of the individual (adult or child) versus the credit card companies is not played on a level playing field. This is a many multi-billion dollar industry preying on people with virtually zero consumer protections. This has been going on for almost three decades. It is time that government regulations leveled the playing field.
There is excellent study about abusive credit card company practices, which is entitled: “The Credit Card Market and Regulation: In Need of Repair.” This study was written by Carolyn Carter, Elizabeth Renuart, Margot Saunders, and Chi Chi Wu, who all are lawyers with the National Consumer Law Center. In March 2007, NCLC presented this study to the U.S. Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs. This subcommittee held hearings on the business practices of credit card companies.
In their study, Carter, et. al. say that “credit card companies were not always so free to engage in such abusive behavior. Credit card deregulation, and the concomitant spiraling credit card debt of Americans, began in 1978, with the Supreme Court’s decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corp. This case gave national banks the green light to take the most favored lender status from their home state across state lines and preempt the law of the borrower’s home state. As a result, national banks and other depositories established their headquarters in states that eliminated or raised their usury limits, giving them free rein to charge whatever interest rate they wanted. Therein lies the reason why so many of those credit card solicitations sent by mail every week come from Delaware or South Dakota: credit card issuers moved there to export those unregulated states’ lack of consumer protections nationwide.”
April 7th, 2008 at 11:04 pm
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