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We're living on a plastic planet, where even vending
machines, parking meters and Starbucks branches are now accepting
credit and debit cards for everyday transactions. Small wonder that
high schoolers -- who were expected to spend $195 billion in 2006,
according to a study by the Harrison Group -- hanker for their own
charge cards.
"Getting a credit card is a rite of passage," says
Todd Mark, director of consumer relations for Consumer Credit Counseling
Service of Greater Atlanta.
In fact, a 2005 study by the Jump$tart Coalition for
Financial Literacy reveals that 31.8 percent of high school seniors
use a credit card. About half of these students have a card in their
own names and the rest use cards issued in a parent's name. And
of course, college freshmen get bombarded with credit card come-ons
as soon as they set foot on campus.
Facing this prospect, plenty of debt-dubious parents
wonder how best to introduce kids to the temptations of swipe-and-sign.
As with most child-rearing decisions, the best course of action
depends on the individual child. But thanks to an ever-increasing
number of credit and debit options, savvy grown-ups can choose the
card best suited to a teen's temperament, financial sophistication
and maturity level.
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Getting started with plastic: | |
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Starting out
Youngsters who already have a checking or savings
account -- and that should be the first step in a kid's financial
education -- are ready for a standard debit
card because they're accustomed to keeping track of transactions,
according to Marc Minker, a CPA and personal financial specialist
at the New York City consulting firm Mahoney Cohen & Co.
Parents can rest fairly easy in this situation, since
even the most acquisitive teen will find it self-limiting: Once
the account balance drops to zero, theoretically, he or she has
to stop spending.
And conveniently, many employers will deposit wages
directly into a teen's account.
However,
since a debit card is taking money from a checking or savings account, overdrafts
and the resulting fees can happen. What's more, if Junior's money gets debited
via fraud or error, or if there is a problem with a merchant, recouping the already-gone
cash can be difficult.
The Fair Credit Billing Act has different rules for
liability with debit card fraud or theft. If you report the card
missing before the thief makes any transactions, the issuer can't
hold you liable for any charges. If you report the loss within two
business days, you will be responsible only for $50 of charges.
If you don't report the loss within 60 days, you can be liable for
$500 of transactions. These rules make it important to check the
account regularly to be sure there are no problems. However, debit
cards from a major card issuer such as Visa or MasterCard carry
the same fraud protections as credit cards, with zero liability.
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