MASTERCARD was accused yesterday of encouraging teenagers to go into debt with the launch of a payment card for children.
The biggest credit card group is issuing prepayment cards to let youngsters purchase products on plastic.
How much the teenagers can spend is limited by the amount that their parents are prepared to deposit in advance, but the scheme was described yesterday by consumer groups as “irresponsible”.
The National Consumer Council (NCC) has raised fears that the cards will get children so used to spending money that is not theirs that they will go hopelessly into debt once they are old enough to apply for a credit card.
Supporters, however, regard the cards, which are issued by Bluecorner, as the natural step in an increasingly cashless society. They argue that the prepayment cards will familiarise children with plastic without spending too much.
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Teenagers are being appealed to by MasterCard in youth magazines such as Smash Hits! and Bliss, and on Magic FM radio. The card is aimed primarily at internet-savvy teenagers seeking to shop online who are not eligible for a credit or debit card.
The NCC said: “There is a risk that the cards will predispose them to irresponsible spending on credit cards later.” The spokeswoman described the enticement of children as a “dreadfully bad idea”. She said: “Payment cards can be useful for certain groups, such as adults who do not have a bank account. But it is a much more dangerous scenario when these cards fall into the hands of youngsters.
“The fact that these cards are topped up by parents could get teenagers used to spending money on plastic which is not theirs in an irresponsible way.”
NCC officials also expressed concern at the charges made by MasterCard. Customers pay a £9.95 fee to open their card account and pay 85p for each withdrawal from an ATM cash dispenser. Card holders are penalised with a £4.99 fee for cancelling an account or ordering a replacement card.
Angela Eagle, the Labour MP for Wallasey and a member of the Commons Treasury Select Committee, said that it would be far more appropriate for children to use Solo debit cards, which are linked to a bank current account. She said: “I do not think these (prepayment cards) add anything in terms of financial education. Children can open a bank account and use a debit card, which is obviously superior.”
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Phil Davies, the director of business development at MasterCard Europe, defended the prepayment cards as a starter kit for financial prudence. He said: “Parents can control the amount of money their son or daughter spends on the card by limiting the amount of money placed on the card.
“These cards have a positive part to play as they can help teenagers and adults to improve financial discipline as they manage the money placed on the card sensibly.”
The minimum age for holding a card is 13. They are used in the same way as credit and debit cards but users should not be able to go into debt. Parents can apply to get cards for their children online.
COST OF THE CARD
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Purchase fee £9.95
Upgrade fee £4.99
Replacement fee (lost/stolen) £4.99
Account cancellation fee £4.99
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PIN issue/reissue £1.00
ATM cash withdrawal fee 85p
THE RISING TIDE OF TEENAGE DEBT
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Findings from the Consumer Credit Counselling Service (CCCS)
18-year-olds seen by CCCS debt advisers since 2003 have had an average of five credit providers
19-year-olds have had an average of six credit providers
Most 18 and 19-year-olds seen by CCCS debt advisers have less than £1,000 a month in income
A 19-year-old who sought help from the CCCS had £48,000 of debt with 19 lenders.
Credit and store cards are biggest cause of debt among teenagers
www.timesonline.co.uk/money