Consumer credit card debt has exceeded the peak set during the recent recession, according to a 2017 Parents, Kids & Money survey by T. Rowe Price, and more parents are giving their children credit cards.
The survey of more than 1,000 people revealed that the number of children ages 8 to 14 with access to credit cards quadrupled in the last five years. The number of 13 and 14-year-olds carrying credit cards more than doubled in the past year alone.
Have parents lost their minds?
“While it might be shocking to hear that so many preteens and young teenagers have credit cards, since they can’t open them on their own, in most cases parents are opening cards with them,” says Kimberly Palmer, a credit card expert for NerdWallet.com. “If parents use that opportunity to talk about how credit cards work, how to avoid debt and how to budget, then it’s a great learning opportunity and will help them graduate to using credit cards responsibly after they leave home.”
That’s the best-case scenario.
But children can also learn bad habits. “They think: see it equals buy it. A spending spree can happen at any time. With a low credit limit on the card, it can be maxed out in minutes,” says Gregg Murset, CEO of Phoenix-based BusyKid, an allowance app.
Manhattan prosperity coach Joel Salomon sums up his feelings about children and teens with credit cards in one word.
“Ugh!” he said. “What have their parents told them about money? Do they know what a finance charge is, or the fees they have to pay if they are late? Do they have the money to pay the bill in cash?”