You're reviewing your credit card bill and find some odd charges. How did you rack up hundreds of dollars in online gaming charges?
Your first thoughts may be fraud – but before filing a fraud report, think about who has access to your credit card. Do your children know where your credit card is and how to use it? Is it available on a computer, tablet, or phone they use?
A new survey by CompareCards.com finds that 29% of Americans with children below the age of eighteen have had a child use their credit or debit card without permission. Meanwhile, 52% of respondents gave their child permission to use their credit cards or debit cards – with 36% allowing three or more purchases. Of that 52% of respondents, 48% regretted their decision.
Men were more likely to be burned by children using their card without permission. While 44% of men claimed to be victimized, only 19% of women did. Men also were far more likely to regret their decision to let children use their card compared to women (44% to 15%). (Perhaps women check things out more thoroughly and men are inattentive old softies.)
How do you prevent getting burned by your kids? Prevent unpleasant credit surprises by teaching your child about credit, debt, and money management at an early age – and be consistent with your message and any consequences that are required if the rules are broken.
It's important that your actions match your messages. While 70% of Americans considered their own parents as very good or somewhat good, 16% considered their parents somewhat or very bad role models. Take an objective look at your own finances. Do you need to clean up your act before teaching your children about fiscal responsibility?
Start by establishing a savings mentality and giving your children the tools to refine it. Over two-thirds (69%) of parents surveyed reported that at least one of their children under the age of eighteen has a financial account, with 81% of those having savings accounts and 41% having checking accounts. Let them learn about spending with their own money.
As your children get older, consider adding them to your credit card account as authorized users. You'll be responsible for the charges they make, so it will be important to establish rules. "If you add your teenager as an authorized user, you still control that account," confirms Experian Director of Public Education Rod Griffin. "You can keep that card, maybe go to the mall with them and help them make charges. Sit down with them; show them how important it is to make those payments each month, how to manage that credit well, so that when they go out on their own, they aren't out there learning from their mistakes."
Explain the basics of credit and credit cards – how they differ from debit cards, the effects of carrying balances and compound interest, and the importance of making payments on time. Advises Griffin, "I think it's a good idea to help your kids start to build credit when they are juniors, seniors in high school. It's important to talk to them about money and help them understand those concepts I think from a very young age."
Don't be afraid to temporarily revoke privileges if they violate boundaries but use the transgression as a teaching moment. To restore trust, they will need to do certain things that show responsible behavior – just like you, as an adult, have to show credit card issuers increased responsibility if you miss payments or run up charges near your credit limit.
Meanwhile, check your credit card statement on a regular basis. At a bare minimum, review the monthly statement – and we suggest checking online statements more frequently. Look into alert options with your card supplier to notify you of unusual charges.
Don't forget to check your credit report regularly as well. You can check your credit score and read your credit report for free within minutes by joining MoneyTips. Even if your child is using credit responsibly, they may be more easily fooled by scams or unsecure payment methods that expose your credit card data. Look for any evidence of fraudulent accounts opened in your name or fraudulent charges on existing accounts.
When it comes to kids and credit/debit card usage, we invoke the words of Ronald Reagan during disarmament talks in the 1980s – "Trust but verify."
If you want more credit, check out our list of credit card offers.