Credit Cards For Kids: Get Them Started Early & Have A Customer For Life
There’s a great documentary style movie available on DVD entitled “Super Size Me” which discusses a very important point about consumer marketing in America.
Filmmaker Morgan Spurlock, shows how one fast food chain targets & markets directly to very young children. The desired long term effect of getting them started early in life is they will become a return customer because they are comfortable with your product. Its amazing to see his point of view backed up by the restaurant’s marketing campaigns which include cartoons, toys, movies, games and all sorts of gimmicks targeting preteen children.
As the story goes, “Get them started using your product at the earliest possible age and you will have a customer for life.” Additionally, this month Jupiter Research, which helps companies profit from the impact of the Internet and emerging consumer technologies, came out with a new report entitled, Payment Preferences Online: Managing the Generation Gap Between Mature and Young Adults.
Current marketing research suggests that accepting a product at such an early age should keep consumers coming back for decades. This is a well understood technique through out the marketing and advertising world.
After briefly reviewing the Jupiter Research report, I wanted to take a closer look at how credit cards are marketed to teen & younger users. Especially how the card companies were using the internet and ‘digital money’ style webs in their ploy to attract really young potential life long ‘credit card users’.
I found the PAYjr web site. The PAYjr Prepaid MasterCard® is issued by MetaBank pursuant to license by MasterCard International Incorporated. This web separates users into two categories depending on their age. First there is the “PAYjr Chore & Allowance System” for web visitors 12 years and younger. For the more mature crowd, 13 and over, they offer the “PAYjr Prepaid MasterCard”.
The ‘Chore & Allowance System’ for 6-12 year olds touts,
“… free financial education and an online chore and allowance system for your kids to be able to track their chores and be rewarded for completing them. Teach your child the value of hard work and allow them to clearly see the connection between doing their chores and financial reward.”
I found myself asking several questions….Do you really need a computer and the Internet to keep track of your 8 year old’s allowance? Does creating daily online tasks for a 9 year old using the ‘Chore & Allowance System’ database really teach hard work….or is all this marketing directed at teaching adolescents they need to learn how credit cards work?
Of course, without PAYjr’s sophisticated online financial education system for 6-12 year old children, how else would youngsters track their ongoing account “Balance Owed”. From the PAYjr web,
“The PAYjr Chore & Allowance system….Ongoing “Balance Owed” is tracked by the PAYjr system.”
Yes, I know, it sounds very similar to the monthly ‘Amount Due/Available Balance’ column’s which show on all monthly credit card bills. Do you think an 8 year old child will immediately see the connection between ‘Balance Owed’ and ‘Monthly Minimum Payment’? Or will he just learn to look at that column first when logging in to his new online revolving ‘allowance tracker’?
Does providing this online web application for little Jimmy better prepare him for financial adulthood or just show him that ‘Credit Cards Are Cool’?
Just like the filmmaker said, teach them when they are young and you have a customer for life. This PAYjr web is a lot of not-so-fancy work to get your former toddler conditioned and ready for his first credit cards.
The Grown Ups
Upon turning 13, both little Jimmy and Jane qualify for a “PAYjr Prepaid MasterCard”. This program for ‘older’ visitors to the PAYjr web, is a plastic re-loadable prepaid card designed just for youngsters.
The same web site that gave us the Chore & Allowance System now tells us that,
“This prepaid card gives teens flexibility and spending independence, in addition to teaching them personal financial management.”
Do they mean ‘plastic financial management’ or ‘personal financial management’? Can’t children learn the same lesson with a $20 bill and handful of change? Isn’t it possible to teach a 13 year old that same ‘personal financial management’ course without the Internet?
Don’t forget about the PAYjr sign up fee and monthly fee. At least that will condition kids for the plastic paved road ahead of them. As luck would have it for little 8 year old Jimmy, “Access to the patent-pending PAYjr Chore & Allowance Management system is completely free.”
While corporate America is busying teaching prepubescent kids how great credit cards are…..I think its important to note that 2005, was the first year since 1933 (The Great Depression) that the US population had a negative saving rate.(1) That means credit card crazy Americans spent all their monthly disposable income then had to dip into their saving just to get by….. I suppose this means all those big ticket adult spenders should have been paying closer attention to their kid’s ‘Chore & Allowance System’.
Its also interesting to note that for the first time in history, a credit card company will now allow card holders to pay their mortgage each month using plastic.(2)
(1) msnbc.msn.com (2) biz.yahoo.com
credit cards
Mark,
I just finished reading your story that included PAYjr. …
wish that you would have taken the time to talk to me and learn a little more about PAYjr first. The whole reason I started the company was to try and keep teens from falling into the traps of credit. Our card for 13 and up is an attempt to keep teens away from the fees that are associated with teen checking accounts. You basically wrote a good article that talks about a real problem in today’s society but ended up making a company that pours its blood, sweat, and tears into trying to help the situation look like the “bad guy”. Let me know if you would like to talk and really understand what we are trying to accomplish. By the way, we have a Savings program that we offer through Credit Unions and we are hoping to provide it on our direct site soon. Take a look at my blog and you’ll see that I think a lot like you do…choresandallowances.blogspot.com
Best,
Dave
David S. Jones
Chief Executive Officer
PAYjr, Inc.
david@payjr.com
T: 214.618.7047
F: 214.618.7051
http://www.PAYjr.com
Dear David,
Thank you for taking time to contact me. I appreciate you emailing me about the article, although it appeared in the AmericanChronicle, it was first published on http://www.digitalmoneyworld.com .
I’m sure you are doing a fine job with PAYjr. and I wish you great success with your venture.
I don’t agree with you on how to market products to America’s youth and I feel I need to quote this old saying, “the road to hell is paved with good intentions” which sums up how I feel about this kind of program for young people, but still that’s just my opinion and I truly with you the best.
For researching this post/article I found about a dozen different web sites that market credit cards and credit card type online accounts directly to teen and preteen youngsters. Each one of them took a different approach. From 100% bypassing any promotional talk of ‘financial education’ and just plaining calling their product ‘cool’ to others such as PAYjr, which takes a proactive approach to financial learning.
I don’t agree with any of them but you can tell some are just marketing gimmicks as the fast food chain offered and some have ‘good intentions’.
Obviously, the TV coverage and print for your company shows its a well liked and successful program. Again, I don’t agree with it, but that’s America.
Your web business was not the only business I reviewed for the information. In my mind, this marketing to kids, is a very very large and dangerous trend for any country, especially debit ridden America. That’s no joke that for the first time since the depression, American’s had a negative savings rate. But I guess marketing a saving account is not so sexy.
Under a microscope, you may say I did an unfair piece focusing on PAYjr and making you the ‘bad guy’. However, I am taking a macro view, including 10-12 American companies marketing and selling directly to young people “how great credit cards are and to be expecting one soon.”. Conditioning youth to be prepared for it in their not so distant future was the premise of the piece.
You can call it ‘financial education’, training, preparation for their future or whatever might suit your marketing. However, in my world, you can’t train anyone, especially a young person the benefits of hard work and reward with a plastic card. But, I’m often wrong.
I just visited your web before writing this letter and I searched the entire web, page by page…NO where on the web could I find the word ’savings’ Are you teaching kids the value of hard work and preparing them for a ‘bright financial future’ but neglecting to EVER mention a savings account? I understand that you mention below in your email that you have a saving plan, but I suppose it takes a back seat to brightly colored plastic, which apparently is a hit.
Don’t banks still have passbook savings accounts?
And aren’t they cheaper in fees than your products?
Listen, you have great marketing and I’m sure a huge client base of young American shoppers. But not everyone in the world agrees that your web site, products and the dozen or so others I found truly accomplish anything more than an introduction to credit cards for today’s young people. Additional confirmation is still coming in by the 7-8 other emails I receive each day agreeing with my viewpoint. I don’t need to talk to you or do further research, if I can scan your entire web and you never once even mention ’savings’ I know who you are marketing to and what you hope to accomplish without further discussion. I mean the entire web, no where can I even find the word “savings”. Come on?
Best of luck, no hard feelings but respectfully, I am going to have to agree to disagree with you on this.
My advice: Take your child, when he is old enough and make him volunteer for the entire summer helping less fortunate people, show him time spent in the service of others is more rewarding than a higher limit on his plastic….and get that kid a passbook saving account.
Mark Herpel
Mark,
Enjoyed the article on kids and credit cards. Great work. You might enjoy one of the songs on our new music CD titled “Debt Stinks.” You can check out the lyrics at our website
http://www.itsahabit.com
Keep up the great work!
Sammy
A couple points I need to make…
First, we don’t market to kids or teens – we market to parents of kids and teens and we have strict rules on that.
Second, as I said in my last email but perhaps it was unclear, we do not offer a savings program direct to consumers because we are not a bank or credit union and therefore cannot create accounts. We do however offer the program and push it heavily to our bank and credit union partners. You can see that here: http://www.PAYjrCorp.com under “products”. The savings account is free to consumers.
The chore and allowance system is free to parents and helps establish a link between hard work and reward. The prepaid card is much less expensive way of teaching teens how to manage their money – to earn and spend responsibly. As far as fees go, we do have fees because we must in order to cover our cost of providing the program but we are still much less expensive than the hidden fees of a teen checking account. In addition, kids today are unlikely to use cash or checks when they become adults; we believe it is best to teach teens with hands-on-experience how to use debit cards in a parentally controlled environment. This should reduce the chances of teens graduating high school, signing up for credit cards and getting themselves into major debt. Let me be very clear, we do not agree with credit cards and the whole program is designed to teach teens the negatives of debt.
Studies (Jump$tart Survey) shows that teens that have a debit card (not credit card) score dramatically higher on financial literacy tests.
Finally, you mention that we neglect talking about saving accounts. Please see our education center:
http://www.payjr.com/education_articles_savings.html
http://www.payjr.com/education_payjr101_saving.html
I didn’t say that your piece was “unfair”, I suggested that you should do more research before making judgments. I agree with you more than you think and that is why we are working hard to try to change things…
Dave
Dave,
I’m free to make judgments like anyone else then write about them, blog them and discuss them and a lot of people agree with me. Having said that, you make some compelling points which would work well with a very select group of upper class kids and families. I doubt you have too many middle class Americans.
Let me ask you one final thing, you say “”teen checking account”" you are referring to a bank’s more expensive plan to manage kids money, that is including NSF. My question goes directly to the larger problem, what the heck is a 13-14 or 15 year old doing bouncing checks around town? Why does business feel the need to market to the kids or parents and offer a 13 or 14 year old with a cheaper solution to his or her current banking? Business in America is doing just what I was discussing in the post, you get very young children started to early. At that age, about 3-4 years before graduating high school, what does a child need with a checking account or plastic? I don’t see it, here is where we differ. What does he even use for ID? See my point of view? Besides the ‘kids of Orange County California’ I can’t imagine to many 14 year olds bouncing checks and getting NSF charges. Is the market of these consumers so large it warrants a targeted financial plan? If so, its a compelling argument….I just don’t see it….but also I can’t understand why anyone would want their child idolizing someone like Paris Hilton. I assume she had both the card and the checks at 13.
I appreciate your comments and like I said, you put forth some very good [excellent] points for your target market. I wish you the best success and thanks for participating in our discussion here.
Mark
I understand your point and appreciate your comments. I didn’t mean to make you feel like I was trying to supress your opinion; I just like to debate these topics because I think it is a good exercise and hopefully we both walk away smarter.
Yes, I was talking about teen checking accounts with NSF fees and they are abusive. As far as cash goes, I like to think that our solution provides a tool for parents to know where their kids are spending money and give them the peace of mind to know that they can get money to their child on a minutes notice if they need to for some reason (travel, etc). In addition, if kids lose cash, its gone forever…not with a prepaid card.
Keep up the great discussions and thanks for your insights, I really do take them to heart.
Take care,
Dave
http://www.payjr.com
One-third of U.S. cardholders are paying interest rates in excess of 20 percent. Another third of accounts — which are presumably the “sub prime” customers — pay interest rates that range from more than 20 percent to as high as 41 percent. Neither credit cards nor debit cards (ie, bank accounts) are good solutions for people with little or no money.
Ya, lets definitely get more plastic to kids….:-(
Mark
I think you’re overlooking the major difference in kids having a debit card and a credit card. Debit cards are simply replacing paper checks and cash – you can’t run out and buy a flat screen unless you have the money, simple as that. And let’s face it Mark, it’s the 21st century – I wouldn’t let my kids grow up without knowing about computers (do you make your kids write all their homework by hand?). It’s just keeping up with the times and sending them off into the world armed with the most current knowledge.
And no, I don’t live in Orange County (…rural Washington, middle class, and everyone I know can send a text message, use a debit card, and use indoor plumbing…)
-bb
Dear Brad,
Thanks for the comment, you are very correct. Debit cards are limited to the amount in the accounts. Plus, Payjr is in my opinion a wildly successful program so its obvious a ton of kids and parents like it.
Also, the world is much different today than when I grew up, AM radio was a big deal then !
My problem is that I don’t believe you should teach children to spend money with a plastic card until they have a job which will produce the income to pay for that monthly expense or that amount. A 8-10-12 or 14 year old should still be pre-job market so what kind of income does he have to pay off his plastic? Now I say plastic, you say debit card. You say the money is in the account before its spent, and I incorrectly term it ‘paying off his plastic’. I understand and I’m not playing semantics on you, but you are teaching them how to use plastic cards. Putting down a plastic card instead of cash at a register, doesn’t make it clear in a child’s mind ‘debit or credit’. At 17-18 years old (or sooner) they instantly graduate to credit cards which they will so easily use in their daily spending, why?…because they already know how are are comfortable with it. So yes, you have prepared them for the technology of the future(or today’s money tech) but have you taught them well enough NOT to over spend with their plastic throughout the next 50 years? Perhaps Payjr does, I don’t know.
Those early years are so important for planting the seeds of knowledge. Are these children indoctrinated into a society where saving and frugal living will allow them to use credit cards wisely? Or are they entering a consumer oriented, shop shop shop world where they are already conditioned to use their ‘card’ whenever they need something?
I’d have to break ranks with you from here out, seeing the average amount of credit card debt carried by each household in America and the negative savings rate across the country I don’t think teaching anyone early in life to use plastic is good. So you make a very valid point, children should know how to use the money technologies of tomorrow (and inside plumbing), but shouldn’t they first learn how to balance their income with their spending ie. age 17-18-19 before you validate their future spending habits? Isn’t 10-14 years old to early?
Again, thanks for the comments, Washington is a beautiful State, I like it very much.
Mark
I don’t think kids should have credit cards. They are way to young. They should just stick to the old green cash allowance.
I think it is a horrible idea to give a credit card to an 18 year old who is now an “adult.” However, giving one to a minor whose parents are held responsible may be a good idea as the parents will have an opportunity to teach their child about the importance of credit.