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CNN Live At Daybreak

Teenagers and Credit Cards

Aired August 03, 2001 - 07:36   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
COLLEEN MCEDWARDS, CNN ANCHOR: Well, how do you teach your kids about good credit, respect for that plastic? Is it good for teenagers to experiment with credit? Does it teach them responsibility or is it just sort of honing those spend, spend, spend genes a little too early? What about giving your 12-year-old a credit card? We're going to talk about that right now.

We are joined by Joy Thormodsgard. She is with the National Foundation for Credit Counseling. Robin Henig is a freelance writer and her 17-year-old daughter, Samantha, as well. All of them are in Washington. Thank you all for being here.

Robin, let me start with you. You gave your daughter a credit card when she was 12 years old?

ROBIN HENIG, FREELANCE WRITER: Well, I did. It was an actual card with her name on it on our account. So it's not as though she was responsible for paying the bills, but she learned how to use it responsibly.

MCEDWARDS: All right. Well, what were the rules, Robin?

R. HENIG: Basically use it for the things that you know that I would pay for anyway. You know don't use it for CDs or for movies that I didn't say you could go to. But for the clothes you needed for school or for the books that you wanted to read, it would be OK for her to use the credit card.

MCEDWARDS: And, Samantha, what was it like for you having the card?

SAMANTHA HENIG, 17-YEAR-OLD CO-WRITER: Well, it made things a lot easier for me to not have to carry around cash for big clothes purchases, especially. And it was just a comfort to know that I had that there. I didn't use it that much, though.

MCEDWARDS: Did you follow the rules or did you sneak in the odd CD in place of a book?

S. HENIG: I basically followed the rules. It sometimes came in handy if I wanted to buy rated R movie tickets, I could use that to get it instead and they never asked for ID, but other than that...

(CROSSTALK) R. HENIG: ... on national television.

(LAUGHTER)

MCEDWARDS: Seriously though, Robin, were there -- were there any problems? I mean do you think -- do you think Samantha learned a lot from the experience?

R. HENIG: I think she did. I think that -- you know the very basic things like how to sign a credit card receipt. You know that -- these were things that we had to teach them before my daughter, my older daughter as well, before -- it doesn't come naturally. And yet using credit cards is so much a part of the way commerce is done these days that it's really important, I think, for kids to learn this at an early age.

MCEDWARDS: OK, Samantha, I'll come back to you in a moment, but I want to bring Joy in here.

Joy, do you -- do you think this is a good idea on the face of it?

JOY THORMODSGARD, CREDIT COUNSELOR: Well, most of us carry plenty of plastic in our wallet. I would be included in that. But with the average consumer holding 14 credit cards in their wallet, that is consumers that have a balance, and over $8,000 in credit card debt and escalating bankruptcy, they need to understand how to use that credit. And it sounds, in this case, as though that child is being taught how to use credit. And you don't start out with a credit card, you move up to that. You have learning steps to take.

MCEDWARDS: So what would you recommend to parents in terms of them teaching their children about credit, Joy? What are the most important things to reinforce?

THORMODSGARD: Well, first and foremost, at the age of three a child should be learning that money is used in exchange to get things and that you have to make decisions. Then you want to, by the time that they're, oh, maybe 10 or so, they should definitely understand a savings account and then the next thing you're going to move into is a checking account. Than after they have a handle on that and they're doing -- handling that account appropriately, move them up into a debit card. Once you see that they understand how to use a debit card, then maybe a credit card, as Robin did with their child, attached to their account so you can see how they're spending it. And, of course, the last step would be a credit card of -- in their own name that they are billed for. But you want to, by that point, be sure they understand it and you want to show them how to shop for rates and how to make decisions on what's the best card.

MCEDWARDS: Robin, I suppose it was important in your family, too, to teach by example?

R. HENIG: Yes, and I think one of the most important lessons that youngsters should learn is that you should pay your credit card bill in full whenever you can because the interest rates, no matter how well you shop for them, are very high. And so what we show our children that we do is we're careful about what we purchase and we pay for it. You know, I think that there is -- there is an allure to thinking that if you're paying for it on credit it's kind of free and that's a lesson that children have to be taught.

MCEDWARDS: Yes. And, Samantha, I mean what did -- what did you really learn from this? I mean do you think you took some of this away with you or was it just an easy way to buy your stuff?

S. HENIG: Well, I think a little of both. Mostly it was just easy, but also it -- I did learn a bit of the fact that just because you charge it doesn't mean that it's free and that you need to be responsible with it. Yes, I think it helped me.

MCEDWARDS: Robin, I know you've even written about this. I mean even members of Congress have asked that this issue be looked into -- young people and credit cards -- and that study found that, what, 22 percent of college students got their first credit cards in high school. That was up dramatically over five years.

R. HENIG: Right. Right.

MCEDWARDS: I mean is it -- is it disturbing to you at all that so many young people are having access to plastic so early?

R. HENIG: It's not disturbing to me that they have access to plastic because it's inevitable now. I mean if you think about how many purchases are made over the Internet, they all have to be done with a credit card number. What's disturbing to me is the idea that maybe kids are getting into trouble because they're not understanding how to use that plastic. There is an increase in the number of young people who are going -- are declaring bankruptcy, although there's also an increase in the number of adults who are declaring bankruptcy. I think all of us need to figure out how to make our purchases in this credit economy in a responsible way.

MCEDWARDS: All right, we have to leave it there. Thank you all for being here this morning, appreciate it.

R. HENIG: Thank you.

S. HENIG: Thank you.

CAROL LIN, CNN ANCHOR: I wanted a credit card when I was 12.

MCEDWARDS: I did, too. And you know what, I didn't get one.

LIN: Yes, me neither.

MCEDWARDS: I did have one in college, though.

LIN: Yes, I'm still learning to manage money, though, you know.

MCEDWARDS: We all are, yes.

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