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PLASTIC FOR KIDS

Credit companies have found a lucrative new market -- teens and tweens

By Sarah Bahari

Star-Telegram Staff Writer

Hello Kitty graces pink and orange MasterCards.

May. 22, 2005 - Pop singer Clay Aiken and rapper Xzibit -- who regularly perform for hordes of screaming young fans -- are pasted on plastic, too. Even teen-age sensation Hilary Duff recently smiled from a Visa gift card.

Credit companies have swarmed college campuses for decades, offering free T-shirts, Koozies or sunglasses to anyone who fills out an application.

Now they've turned their attention to teens and tweens, and debit and credit cards have become must-haves for a much younger generation. Prepaid plastic is also gaining popularity.

"Everyone has some sort of plastic," said 17-year-old Crystal Kelly, who works part time at Limited Too in Arlington.

Credit companies tout the cards as a way to teach youths fiscal responsibility and smart spending habits. But consumer watchdogs call the trend worrisome and predatory, noting that some of the cards carry fairly hefty fees.

About 11 percent of teen-agers have credit cards, and an additional 10 percent use their parents' plastic, national surveys show. Tens of thousands more use debit cards, and analysts say those numbers are growing.

Kids ages 12 to 19 spend an estimated $169 billion a year, according to Teenage Research Unlimited, an Illinois-based marketing firm.

"This is a very lucrative market," said Travis Plunkett, legislative director for Consumer Federation of America, a Washington, D.C.-based consumer advocacy group. "It's virgin territory for the credit companies."

The cards do come with parental controls. Parents -- or at least someone older than 18 -- have to sign up for the card, and they can track purchases and deposit money online.

"This gives parents a peace of mind," said Rhonda Bentz, spokeswoman for Visa, which introduced Visa Buxx, a prepaid card, in 2000. The card's target audience is 13- to 17-year-olds.

Late last year, MasterCard came out with a prepaid card featuring Hello Kitty, the small, cartoon cat long popular with young girls.

Peter Klamka, president of Legend Credit, which developed the Hello Kitty Card, said it has seen the most popularity with girls in their late teens. Klamka would not provide exact figures but said the card numbers in the tens of thousands.

The card's Web site, www.hellokittycard.com, boasts that "you can shop 'til you drop at millions of locations."

MasterCard also offers the MyPlash card, which stands for My Plastic Cash. In addition to Aiken and Xzibit, customers can also have teen rock band Simple Plan branded on their plastic. Credit officials say the cards are similar to weekly allowances, only better.

"This way, you don't have to worry about losing large amounts of cash," Bentz said, "and parents can keep tabs on their kids' spending."

In the next couple of months, Legend Credit will introduce a new virtual credit card aimed mostly at teen-agers who shop online, Klamka said. Customers will receive a 16-digit identification number and a 4-digit PIN number, but no actual card.

"This is the future," he said.

It is unclear whether these new cards will attract most teens.

Many now opt to use their parents' credit cards or debit cards attached to checking accounts.

Before Lisa Gluck heads to the mall, she grabs her mom's credit card. Her parents pay for her highlighted hair, her cellphone, her meals out and most of her clothes.

Gluck, 17, who works at Abercrombie & Fitch at North East Mall, said she uses her paycheck to add items to her wardrobe.

Gluck said about half her friends at Keller High School carry plastic.

"So they don't have to ask their parents for money," she explained, adding that most parents actually pay the cards.

Kelly, the 17-year-old who works at Limited Too, shares a credit card with her mom. She uses it to buy clothes and food when she is low on cash -- about eight times a month.

Though many of these cards appeal to teen-age girls, plastic is also gaining momentum among boys. Jared Henderson, 16, of Arlington said he would like to get a debit card because it would be easier to carry than a wad of bills. And that way, he said, he would not have to ask his mom to bring his money when he runs out.

Some teens -- possibly learning from their parents' financial burdens -- have shunned credit. The average American household carries $9,205 in credit-card debt, according to CardWeb, an online industry tracker.

Ashleigh Anderson, 18, refuses to apply for a credit card. "I don't want to get in debt like my parents," she said.

Financial experts say the cards could help teens learn how to manage money only if their parents are involved in the budgeting.

"You wouldn't give a kid a musical instrument and say, 'Here, plunk around on this for a while and see what you learn,' " said Laura Levine, executive director of Jump$tart, a Washington, D.C.-based nonprofit agency that promotes financial literacy.

Consumer groups say any lessons learned are too pricey. Because many of these are not credit cards, companies cannot make money by charging interest; instead there are fees.

The Hello Kitty card, for example, carries a $14.95 activation fee, a $14.95 annual renewal fee, a $2.95 monthly maintenance fee and a $1-per-minute fee to talk to a customer service representative.

Ken McEldowney, executive director of Consumer Action, a San Francisco-based consumer advocacy organization, said credit companies are building brand loyalty in even the youngest consumers.

And often, he said, these cards are more about style than practicality.

"It's almost as if credit-card companies aren't satisfied that kids will leave college in deep debt," he said. "Now they want to get them hooked before they turn 10."

As online shopping grows -- it is now a $92 billion industry -- the teen-age market will only get stronger, analysts say, because youths are typically the most comfortable shopping on the Web.

But for now, some teens remain unimpressed with their plastic options.

Mary Gonzales and Reyna Garcia, 13-year-old Arlington sisters who do not yet carry credit cards, said Clay Aiken and Simple Plan do not appeal to them. But a card featuring Latina pop star and actress Jennifer Lopez just might.

Staff Writers Leila Fadel and Kelly Melhart Contributed to This Article.

IN THE KNOW

Definitions

• Credit card -- It allows customers to spend money they do not yet have but will earn in the future. Parents must co-sign for it and are ultimately responsible for any problems.

• Debit card -- They are often linked to checking accounts, and money comes directly out of the account. Banks have different rules on ages, but teen-agers can typically get these cards.

• Prepaid debit card -- These can be reloaded with money, and parents must co-sign. Because it does not carry a line of credit, it cannot negatively affect someone's credit.

By the numbers

$169 BILLION

- amount of money kids ages 12 to 19 spend a year.

11 PERCENT

- of kids ages 13 to 18 have credit cards.

10 PERCENT

- of kids ages 13 to 18 have access to their parents' credit cards.

30 PERCENT

- of kids under 18 have checking accounts, many of which are likely linked to automated teller machines with debit cards.

SOURCE: Junior Achievement, Teenage Research Unlimited

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Sarah Bahari, (817) 685-3863 sbahari@star-telegram.com