Wednesday, March 27, 2002

Plague of plastic descends on kids


Credit cards seem to be everywhere, but parents are divided about whether children should have access

By Shauna Scott Rhone, srhone@enquirer.com
The Cincinnati Enquirer

        Elizabeth Dugan has received “tons and tons” of credit card offers in the past few years. She doesn't have a blemished credit history. In fact, she doesn't have a history at all. Elizabeth is a 17-year-old Mason High School senior.

        The constant credit card offers she gets through the mail don't tempt her in the least.

        “My mom and I usually laugh about them and then stand together over the trash can and shred them,” Elizabeth says. “Credit cards are for adults who have jobs and know how to use the cards wisely, not for a ... kid who'd use it to treat their friend to pizza every Friday, cause that's what I'd do.”

CREDIT CARD TIPS
    Learn to be a wise and responsible credit card user:
    • Always remember that credit is a loan.
    • Shop around for the best deal by studying closely each card's terms and conditions. Always pay your bills on time.
    • Keep careful track of your finances.
    • Try to pay your balance in full each month.
    • Limit the number of credit cards you acquire.
    • Create a budget and spend within your means.
    • Review your statements carefully.
    • Immediately inform your credit card company of an address change.
    • Keep a list of your credit card account numbers and phone numbers in a safe place.
    • Review your credit reports periodically and check for inaccurate, incomplete or outdated information.
    Do not overextend your credit:
    • Due to wide availability of credit cards on campus, many students start getting into credit card debt deeply before they get out of school. According to one survey, the average undergraduate has more than $1,500 in credit card debt.
    • The problems occur when students are not taught to use credit wisely. It's not the credit cards, but the lack of education that gets students into trouble.
    www.onecreditguide.com
RESOURCES
    Books to help explain it all:
    • Personal Finance for Dummies IDG Books; $21.99) by Eric Tyson (
    • Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not! (Warner Books; $15.95) by Robert Kiyosaki
    • The Secrets to Good Credit and Debt Reduction: A Consumer Self Help Guide (Premier Educational Services; $12) by D.J. Williams
    Two Web sites provide a easy-to-read navigator through the maze of credit card “fine print.”
    www.creditcardfreedom.com: Includes consumer ratings on the most and least popular credit card offers available.
    www.onecreditguide.com: Apply for cards online, compare credit card types and features, tips on debt management and how to read a credit report.
        Thousands of offers are being mailed to minors, inviting them to apply for credit cards — with their parents as co-signers.

        Kids and credit cards are a hot topic for Tempo's Family Advisory Panel, whose members suggested we examine how parents are handling the issue. Several parents and their children offered thoughts on: whether having access to a credit card teaches fiscal responsibility, how credit card companies get the names of children, and how parents who have allowed their teens to carry cards shepherd their use.

        The record for the youngest child to receive a credit card among panel members goes to 17-month-old Lilyann Tursany of Woodlawn, Ky.

        Her mother, Kelly, reports Lilyann's 7-year-old sister Rhealynn also has received credit-card offers in the mail.

        Renee Allen of Deer Park says her 12-year-old son, Shane, has not received an application yet. Would she allow him to apply if one came in the mail?

        “Absolutely not,” says Mrs. Allen. “Maybe if he was older and more responsible, I might consider it. As long as we (she and husband Mike) monitor it. With all the fees attached to them, it's just too weird in this day and age. I didn't have one growing up, so I wouldn't think I'd let Shane have a credit card.”
       


Kids added to cards

        The rest of our Tristate families received offers for children at least old enough to sign the application. Debi Hertel of Reading says adding her sons Justin, 19, and Todd, 17, on her credit card came in handy during a doctor's visit.

        “I just recently decided to add them to our one credit card because I am working more hours,” says Mrs. Hertel, “and we just ran into a situation yesterday where Todd had an eye exam at Pearle, and I was not able to go at the times available ... I gave the credit info over the phone. They would only be able to use it with our permission, and we trust them, so that shouldn't be a problem.

        “Actually, Justin has been receiving credit card offers for a few years now ... and Todd has been for the past year. We just tear them up ... we do not want them to have one because the ones offered to them have extremely high interest rates.”

        David and Denise Harpring wondered whether there could have been a connection between their 17-year-old daughter, Becky, receiving her first card offer “after she signed up for the ACT and SAT tests.” The Harprings allowed their younger daughter to open a credit card account before she took a trip to England.

        “It was easier than dealing with cash, exchange rates, etc.,” says Mrs. Harpring. “She always pays her bill in full — that's required. She will be in college in the fall. We will have the "credit card talk' before she goes.”

        Becky and her older sister, Amy, are suspicious of credit card “deals.”

        “Amy didn't even want a credit card when she went to college,” Mrs. Harpring says. “She finally did get one her sophomore year, but she only uses it for textbooks and emergencies.”

        Chris Lemmon of Milford also wondered about a mystery list of teens for credit card companies.

        “I know as soon my kids (17-year-old twins Ben and Jenny) got their driver's license, the credit card companies attacked our mailbox like vultures on road kill,” says Mrs. Lemmon. “We have not co-signed for any credit cards for our kids and have no intention of ever doing so (because our parents didn't do it for us).”
       


Teaching responsibility

        Anthony and Michelle Wisbith of Lebanon are stressing the importance of fiscal responsibility to their oldest child, 14-year-old Nick.

        “We would not want him to have a credit card at this age, regardless of who co-signed on the account,” says Michelle. “Anthony and I are explaining and giving concrete examples (on a smaller scale) of the importance of saving the money he earns. We want him to learn that credit cards shouldn't become something he relies on for everyday purchases.

        “We point out the interest rates of various credit cards, especially the introductory and post-introductory rates of new card offers.

        “Next, we have him do the math to show how long it would take to pay off a balance of, say, $1,000 on each card and help him figure out how many hours he'd have to work to earn that money. Working an extra (fill-in-the-blank) hours to pay off a purchase you made a month ago isn't appealing to anyone, especially a 14-year-old boy.”

        The Cardweb.com site offer statistics on what interest rates can mean in real dollars. For example,a cardholder with a $1,150 balance and an interest rate of 14 percent will pay $800 in interest and make 133 monthly payments if he or she makes a minimum payment of 2.5 percent each month. That's almost double the original balance paid off in a little more than 11 years.
       


Communication stressed

        Both of Beth Orr's children, Doug, 26, and Sara, 24, are grown and on their own. The Forest Park resident believes communication is very important when dealing with kids and credit.

        “I put my son on one of my credit cards when he was 16 to use in emergencies,” says Mrs. Orr. “It was not to be used for anything else, unless I specified he buy something with it. He later had another credit card from his dad to use on college expenses (we were divorced by then). He never abused it. I know my ex gave my daughter a charge card also.

        “I think, again, as in almost anything else with kids, it depends on the kid and whether the parent has a good, open relationship with that child, so that there is mutual respect and trust. Plus, it depends on the parents' attitude toward credit.”

        Anthony Eversole of Elmwood Place agrees.

        “My advice is ... Don't try it because most adults cannot handle the responsibility, myself included, but IF you do... set strict limits and make sure they are able to pay for it with a job.”

        A good compromise for kids and parents could be sharing a debit card. The card's connection to the bank balance rather than a credit limit balance makes spending more reality-based.

        Derwin and Terri Ward of Hamilton gave one to their 18-year-old daughter, Charity. “It is a good chance to teach children fiscal responsibility and good stewardship,” says Mrs. Ward. “The card is actually not a "credit card,' it is a debit card and therefore she is not borrowing money.”

        “Only parents who are highly responsible for their kids should consider this,” warns Mrs. Ward. “By that I mean, know their every move, whereabouts, etc.

        “We only decided it best for her to get a card when she had a job and was driving a lot. We feel it is safer and less tempting than carrying around cash. It is especially handy for gas money. She has had this card for almost three years now and it has worked out well.”


The fine print

        Michelle Abernathy, a counselor at Smart Money Community Services in Over-the-Rhine, urges parents to sit down with their teens and read the entire credit card application.

        “Understand what the agreement is,” says Ms. Abernathy. “If you don't read it, you may agree to something you don't know about.”

        She also tells parents to beware of two-cycle billing practices, common on student credit applications. Interest on the balance is applied twice within the 30-day period on both the carried over balance and all new charges and if the payment is late (based on date received not postmarked), the cardholder loses the grace periods and the balance continues to rise.
       



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