Controlling credit for teens? Priceless
A ccording to a Junior Achievement poll, one of every 10 teenagers uses credit cards. Some of those heavy chargers are as young as 13.
Given that it could take 10 years to get one’s bad credit back on track, this poses a serious impediment for the next generation trying to live the American Dream. It presents obstacles for college financing, too.
What are they buying? Clothes mostly. The future bankruptcy filers of America will be among the best-dressed people in their communities.
The primary population filing bankruptcy are people under 25. If you’ve been charging since 15 and have accumulated considerable debt, the manic monetary highs are followed by some serious lows.
The higher they charge, the harder they fall.
Junior Achievement joined the Allstate Foundation for its 2006 Interprise Poll on personal finance, released in April. The pollsters caution that although the results “cannot be represented as a scientific cross-section of American students” between 13 and 18, the results do reflect the opinions and attitudes of the diverse group of teens who were polled. If you’re concerned about the future of our youths, read the poll online ( www.ja.org) while you cut up the cards.
Poll results should make permissive parents want to consider setting some boundaries. Some people have more money than brains. But it’s not just rich kids who are charging. Rural and urban kids are, too. A gift card is one thing, but what’s a 14-year-old doing with a Mastercard or Visa charge account? Some banks won’t allow children with savings accounts to get ATM cards without parental involvement. So how does this same child qualify for $5,000 in credit and cash advances?
If kids are charging, it’s because the industry makes it easier, parents look the other way, and retailers cash in on youthful indiscretion.
The easiest way for kids to charge, obviously, is the Internet. When it comes to checking their ages, the Web relies on the honor system. Junior Achievement found that 59.3 percent of teens polled have made online purchases with credit cards.
According to the Interprise Poll, credit card ownership jumps with age. Five percent of teens between ages 13 and 14 reported owning – yes, owning – credit cards. At age 17, card ownership climbed to 9.8 percent. At age 18, card ownership doubled to 19.6 percent. Have we lost our minds?
Nearly 16 percent of teens polled said they pay the minimum payment due, while 83.6 percent claimed they paid the full balance each month. Just 0.7 percent skipped payments. About 74 percent charge $100 or less a month.
According to the poll, nearly 25 percent pay for less than 15 percent of their expenses. The adults still end up digging their kids out of the hole they’ve dug themselves in. So parents, who have household expenses, get deeper in debt, too.
Teen charge accounts are the perfect storm for identity theft and fraud. Only 4 percent of poll respondents reported being victims of credit card fraud. From what is known about adults and fraud, those numbers are probably higher. Nobody likes to admit they’ve been duped.
Junior Achievement and the Allstate Foundation identified a problem. How to address it?
First, there’s no substitute for good parenting. If the shopping mall is your teen’s hangout, well, duh! Your son or daughter could be copying your spending habits, too. There’s something else: The poll reported that 72.1 percent of teens said they influence household buying decisions.
Second, merchants and banks should make a greater effort to limit minor children’s charge account ownership and purchases. If they won’t self-regulate, state and federal authorities should step in.
Third, congressional lawmakers should follow up on the poll with open hearings on Capitol Hill. Banking committees should hear sworn testimony from card pushers, underage users and those who profit from high interest rates and insurmountable debt.
If you have to be a certain age to drink alcohol, drive a vehicle, buy smoking tobacco, vote and join the armed services, shouldn’t there be stricter rules about when you can become way over your head in debt?
According to Junior Achievement and the Allstate Foundation, it would take a teen making minimum payments nine years and almost $2,000 in interest fees to pay off a $1,000 card balance at an 18 percent annual interest rate.
Surely, we owe our children a brighter future than that.