Sunday, August 13, 2000
Now for kids too
Visa offers prepaid credit card to kids 13 to 17 teens
By Eileen Alt Powell
The Associated Press
NEW YORK — Visa USA has come up with a new card aimed at capturing a growing market — teen-agers.
Visa's Buxx “reloadable payment card” will give kids ages 13 to 17 a spending system that Visa describes as “safer, but still as convenient as cash.”
Credit card companies know well that the nation's 30 million teen-agers constitute a valuable market, already spending an estimated $150 billion a year. Researchers say these kids will likely outspend their profligate parents — and that expectation is making consumer advocates uneasy about Visa's newest product.
Visa, the bank-owned association that runs that nation's largest credit card system, says teens can use the Buxx card to make purchases on the Internet or at the local mall, as well as to download cash from automated-teller machines.
It works this way: Parents set a spending limit and pay that amount into a special account. They can then monitor the child's spending online or via a toll-free number. They will be able to “reload” the card as needed.
As part of the issuing process, Visa is asking parents to walk their teens through an online financial skills test “to encourage family dialogue about money management and financial responsibility.”
Consumer advocates understand that there could be value in giving children a means of buying online or off without having to borrow a parent's credit card. But they also have concerns that American children, like their parents, could be encouraged to spend their way into trouble.
“Magic money,” was the reaction from Steve Rhode, president of MyVesta.org credit counseling service in Rockville, Md., and coauthor of Get Out of Debt.
Mr. Rhode suggests that a credit card for teen-agers “could be a fantastic teaching tool” if used properly. But he worries that kids will only get half a lesson.
“While it's beneficial for parents to work with children as young as possible on saving, checking and credit, it's not effective to have parents make deposits in accounts and have kids spend the money,” Mr. Rhode said. “All you're doing is educating them how to spend.”
What's missing in this equation, he adds, is what he calls the critical part: having kids earn their own money and learn to make decisions on how best to use it, including for savings.
Frank Torres, legislative counsel for Consumers Union, the advocacy group that publishes Consumer Reports magazine, said, “Visa and other credit card companies are not altruistic organizations” and suggested that products such as Buxx are “designed to get the young people of this country addicted to plastic.”
Mr. Torres also expressed concerns about the privacy of children signed up for the new card.
“It will give Visa a wealth of information about their spending patterns,” Mr. Torres said.
Stephen Brobeck, executive director of the Washington-based Consumer Federation of America, argues that “there are a lot of ways to teach kids about finances that don't involve plastic cards.” He suggested helping children set up savings accounts and then, in their teens, checking accounts. Credit card instruction should come later.
“One of the reasons that millions of Americans get into trouble with credit cards is that they never learned effectively how to budget and save,” Mr. Brobeck said.
Visa think that Visa Buxx should be looked at as a package that includes both “a better alternative to cash” and an educational tool.
“The whole thing is built around interaction between parents and their children,” said Jeff Kann, executive vice president of Visa USA. In addition to working together on the financial skills assessment test, parents will be able to play a role 24 hours a day in monitoring their children's spending, he said.
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