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Kids These Days:

Monitoring minors’ credit

May 04, 2009|By Steve Smith

Of the events and actions that can adversely affect family life, first or second is credit card debt.

When not properly used, credit cards can sap thousands of dollars from family funds over just a few years; money that could be used for college savings, family vacations or the purchase of a better home. That wasted money comes not from the use of the card, but the failure to pay off the balance each month.

The subject of credit cards hit home recently as three events came together in one week. These events caused my wife and I to have an important discussion with our daughter, now 18 and living away from home.

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Last Saturday, Kaitlyn got her first credit card. She applied for it on her own and qualified to receive it because it is secured by the money she has in a savings account. The card has a limit of $500.

When Kaitlyn got the card, I took a few moments to explain to her the responsibility that accompanies it. Far from rolling her eyes at another lecture from Dad, she listened and asked a couple of questions when I was done. Her receptivity was made easier because my wife and I practice what we preach: We have shared a credit card for nearly as long as our 22-year marriage and we have never carried a balance.

Kaitlyn was told that even though her limit is $500, her bill could go well over that if she is not careful. She has been very responsible in other areas of her life, and we have no reason to believe she will abuse the credit card privilege.

Days before Kaitlyn got her card, our son Roy, 16, got a credit card solicitation in the mail. It promised — in large letters — no application fee, no annual fee and no interest on purchases up to $250.

Reading the fine print, however, I understood how the company could give so much away.

If Roy transfers a balance to the card or takes a cash advance, the interest rate on that money is 22.99%. If he fails to make a minimum monthly payment, his interest rate climbs, starting at 25.99%. But it could easily approach the 30% range.

That sounds horrible, but it gets worse. Included in the envelope was a page of 34 stickers, each one representing the image that Roy could have on his new credit card. The images included a pile of cute puppies, the Statue of Liberty and a bird sitting on a cat’s head.

Oh, and there was a sticker with a happy face, too.

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