Credit cards for teenagers
Teen Research Unlimited, Northbrook, Illinois, US says 11% of the US population belongs to the 12 years - 19 years age group, counting to about 31.3 million teenagers. These millions of teenagers already have their own way of making money through short-term jobs or contract jobs or sometimes even full-time assignments; money for personal use (pocket money!!). With an increasing population of youngsters with money-in-the-bag, it comes as no surprise that Credit Card companies consider teenagers the most potential customers for the present and the future. Adding fuel to fire is the online-credit-card purchase option that attracts everybody, young and old!
The card businessmen started with college-students, once they exhausted the adult-market. Now they are moving further down in the age-ladder to the members in the teen-age group. The big question here is - "Are these young card-buyers really ready to enter the plastic market" Various studies revealed that the members of this age-group are not literate-enough to hold a credit card and make online purchases and make bill payments on time and understand the consequences of non-payment/late payment. A credit-card in the hands of the young is safest when it is monitored by an adult.
How this works: The card companies keep a close eye on the high school and senior school demographics and provide these kids with internet co-signed master cards, addressed to parents. The card and the bill are provided in the student's name, while the parent remains legally accountable for the repayment of the card. One of the leading card-brands in the US offering credit cards to the teenagers is Capital One http://www.capitalone.com/. This company charges a sharp 19.8% annual fixed rate without any annual fee and with a card limit in $200 - $1000 range.
Is this a threat Threat may be a big word, but this could be a warning signal. A credit purchase option for a minor, who is still not sure with many things in life and about the world, could be a threat to the society. In the absence of proper education about the card and the lack of parental control is a threat to the usage pattern of the card and the increasing credit standing. It is not a threat, of course, to the companies making money from minors, while the adults are still responsible for the repayment!
Since this trend is already in, we could probably best look out for precautionary measures to ensure that the card creates only financial liabilities and does not make the society and Government liable to answer.
Some simple measures that can ensure that the Credit Cards with teenagers are not misused could be:
1. Restricted entry for card sellers in school premises and vicinities; unless with education motive
2. Card sales should be made with complete disclosure, as is made while sold to an adult. This will include all warning statements
3. The parent should take responsibility for the child while making the co-signature; here responsibility would include educating the child about the pros-and-corns of a credit card, its usage, interest rates, consequences of non-payment and hazards of misuse
4. Schools and education institutions should conduct training modules or courses to increase awareness of card usage and its dos-don'ts
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