Can You Safely Give a Teenager a Credit Card?

Update: Credit card companies will have to get parents to cosign if the child wanting a card is under 21. Otherwise the child will have to have a steady job and have means to pay back the card. At least now, parents will be able to refuse to cosign and exercise a little more control. Oh, except that most will give in to their children. We hope not.

There are quite a few children who can handle credit card debt, and certainly children away from home can benefit from credit cards or a Visa or Mastercard logo on a debit card supplied by parents. But statistically, 80 percent of young adults graduating from college have credit card debt. In my opinion, in these extraordinary times, any excess and cumbersome debt is a risky proposition.

Certainly, the convenience of credit cards can help children who need cash quickly. The safety factor of giving children credit cards makes a lot of sense. Sometimes kids just need money, fast. But I would suggest that this credit card be an emergency card only. If it becomes the vehicle for spending on basic non emergency needs then young adults run the risk of debt burden that could affect jobs, housing, and insurance costs after graduation. That is a very risky proposition in a tough job market. Why major in a discipline where good credit is needed in order to get the job, only to put that degree earned at risk. What a huge monetary problem that could be for new grads!

If the child proves that he or she can handle an emergency card then go with it. If he charges it to the limit then make sure that he knows what he is risking. If you cannot afford to bail him out then don't let him have a card.

Many people, even those who have not lost jobs, are over their heads with credit card debt and have to deleverage. Sometimes that means ruining your credit score. If you are a senior citizen you probably can get away with letting your score tank. See Dontpaycreditcards.com. But a young person cannot take that risk unless he is up against severe financial difficulty and has no plans to work in financials or for a company like Macys that went bankrupt while refusing to hire employees who went bankrupt!

If you, as a young person are not headed toward certain financial jobs or jobs where you handle money in a sensitive way, you may not need a great credit score for employment, but you also need to think about housing and insurance payments and the effect the credit score will have on your future. You need to try to live without credit to the best of your ability.

Many know that I hate what the big banks have done and there are links here that will explain in detail what they have done to destroy trust. Young people should be taught that credit is indeed a dangerous tool, which is made more dangerous by the unethical behavior of banks who are weakened. They no longer behave like trusted creditors, but rather like loan sharks.

It is unfortunate that most Americans are in the dark about one of the greatest scams ever fostered in the history of mankind. The toxic loan credit mess destroyed the wealth of the middle class in America and in Europe. House prices declined after being artificially pumped up by loans that were not set up to successfully pay back. I do not believe those house prices are going to come back.

It is my view that the scam was crystalized at a meeting of international bankers at Basel in Europe in 1998. I believe that the banks hatched the shadow banking system right there and that they set in motion undue influence upon the government of the United States and the Bush administration to allow that shadow off balance sheet accounting to flourish in the United States, setting the stage for securitization of loans into bonds rated AAA but were really worth much less.

Americans need to know that there is a class warfare, but that it is a warfare between the international banking class and the rest of the world. The rest of the world bought the crap mortgage bonds and have been so disillusioned that they no longer are willing to buy trillions of dollars of these bonds now languishing on the books of the banks. Who knows if the banks will survive the defaulting of all the bad mortgage toxic loans, commercial credit loans and credit card loans that depended upon the disbursement of these securitized bonds. The market for the bonds is frozen and will likely remain that way. If the big banks survive it will be upon the backs of the American taxpayer through PPIP, as the scam continues.

The result of the freezing of the securitization markets is tight money. Banks are just trying to survive. They made bad loans in an environment where income is not going up due to globalization. These banks knew that this could all end badly and people warned it would end badly. The story is not over, as even the government, with rose colored glasses is only predicting a return to 5 percent unemployment by 2013. It may take longer depending on what industries and wars (God forbid) emerge. Don't trust your children to the military life if you have a choice under this weak dollar risky economic plan.

So then, this is not rocket science, and you need to teach your kids that banks are not your friend, and in certain environments, can be your enemy. Teach your kids that credit card interest rates will not come down even though they should, because the banks are allowed to loan shark and charge exhorbitant rates even as their borrowing costs go to 1/2 percent. You cannot trust banks that borrow at 1/2 percent and lend at 20-30 percent. These banks are your enemies! They are still waging a class warfare against you after already fleecing the bond investors and the homeowners. This is an important lesson that all young people should learn.

Children should understand that the credit crisis is not over, that interest rates could go sky high, that if you aren't going to live in your house for a long time in this age of fiat currency, that you may be better off renting.

The banks have been allowed to engage in the PPIP program, which will put the trashy securitized bonds into the treasury in return for money from taxpayers. The result will be the potential for massive inflation and sky high interest rates. And most importantly, this government debt could result in the decline of the credit rating of the United States. That will permanently raise interest rates for all of us. It could be coming. Be careful with debt!

What is happening is that US bonds are not being bought with a lot of conviction in the bond market. This has ominous implications because the Obama administration has estimated the budget based upon 8 percent unemployment even though we are already higher than that. The bigger the deficit the more bonds will have to be issued. This increasing deficit will work out badly for the economy. Young people will suffer more now than perhaps at anytime since World War 2 if they borrow too much.