Personal Finance

Your child could be running up your credit card bill. You can fix that

Key Points
  • Twenty-nine percent of parents with children under 18 have had their children use their credit or debit cards without their OK.
  • Those charges could stem from routine activities, such as prompts to make purchases on mobile devices.
  • Here's how you can talk to your kids to prevent them from racking up those big bills.
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If you have children, you may let them play with your tablet or smart phone. But letting them do so could cost you.

A new survey from CompareCards found that 29 percent of parents have had their children under age 18 use their credit or debit cards without their permission.

Those purchases could be prompted by a seemingly innocent activity: your child's activity on a mobile device. If they click and enter a password, a new app, video game or other feature is theirs — but the bill is all yours.

"A lot of parents can get in trouble because their kid just kind of goes to town," said Matt Schulz, credit expert at CompareCards.

That comes as parents grapple with how to best guide their children with money. The survey found that 52 percent of Americans have let their children ages 18 and younger borrow their credit card or debit card to buy something online.

And 48 percent of respondents said they regretted that decision.

Men were more likely than women to feel that remorse; they were also more likely to say they were caught off guard by unexpected purchases their children made.

CompareCards' online survey, undertaken in October, included 807 adults with children 18 and under.

Talk it out

The survey findings point to a need for families to have more direct communication about money, Schulz said.

"It's really important that folks have those conversations with their kids and set the boundaries, set the guidelines and make sure the kid knows what's going to happen if they drop the ball," Schulz said.

Adding your child as an authorized user of your credit card can be a good idea and help provide valuable money lessons, said financial advisor Roger Ma, founder of Lifelaidout.

The key is to set specific guidelines, Ma said. That includes identifying the situations in which they are allowed to use the card, the maximum amount they are allowed to spend per month, who will be responsible for paying off the balance each month and what the consequences will be if they do not follow those rules.

To better track their activity, parents may want to consider adding their children to a new card or one they do not use as often.

"Adding a child as an authorized user could be a good way to increase a child's financial literacy, and potentially their credit score, as long as the proper expectations are set and communicated up front," Ma said.

Watch your kids' records

Money lessons
Money lessons

CompareCards' survey found that 69 percent of parents with children under 18 had opened up at least one account on their behalf. The most common: savings accounts.

One thing to keep in mind as you strive to raise money-wise children: You also need to keep an eye on their credit scores.

That goes especially as children's records have become more susceptible to fraudsters through data breaches.

"The fact that parents need to think about checking their 10-year-old's credit is a really sad thing, but it's indicative of where we are with financial fraud and how prevalent it is," Schulz said. "The longer fraud goes on, the harder it is to walk back."

To really protect those accounts, parents should consider taking an additional step: putting a credit freeze on their children's records, Schulz said. That may require you to open an account in your child's name first, but it can save you years of worry.

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