Is introducing teens to the concept of credit a wise thing? Here's what banks in SA offer teen clients.
In a bid at responsible celebrity, American reality television personality Kim Kardashian is lending her name to a ‘kiddies’ credit card’, the Kardashian Prepaid MasterCard
. Intended to teach teens aged 13-18 how to spend sensibly, it will allow parents to extend a small amount of credit to their children.
The Kardashian card is not, of course, a real credit card – it’s really just a way for parents (who are the ones extending the credit, not the bank or even Kim herself) to keep track of what their kids are spending their money on.
Here in South Africa, where the cult of celebrity isn’t as pervasive as it is in the States, and where shopping splurges are the exclusive domain of the very few super-duper-rich, the issue of credit cards for kids is a more serious matter.
All risk and lending in our country is regulated by the National Credit Act
, which lays down very specific rules in order to curb reckless lending.
But everybody’s got to learn sometime, and indeed one of the aims of the Act is to educate consumers so that they are empowered to make informed choices, and borrow responsibly and within their means.
Credit for students
To this end, several banks, including Nedbank and Absa, have introduced a ‘student credit card’. This allows students from the age of 18 to apply for their own credit card, which has a low credit limit (R500 in the case of Nedbank, R200 for Absa). Students are responsible for the management of their account and the payment of their own credit-card bills. (This website
has a comparison of credit cards available in South Africa).
There is also the option of a student using a credit card that is directly link to his/her parents’ credit card – this is called a ‘sponsored credit card’. The management of this account and the payment of the bills is the parents’ responsibility.
The upside of this is that, as is the case with the Kardashian MasterCard, parents can track what their children are spending their money on; the downside is that the children’s credit limit is whatever the limit is on their parents’ credit card. Not all parents are happy with the thought of their teen walking around with a credit card with a limit of, say, R50 000 on it – not necessarily because of the possibility of an irresponsible spending spree, but because if the card is lost or stolen, that’s the amount of money a scammer could draw on it.
Anyone over the age of 18 (which is the age of majority in South Africa) who applies for a credit card in their own name has to be able to prove an income (in other words, be receiving a salary) and undergo a series of checks and balances, including a credit scoring and risk rating.
Since students obviously aren’t earning an income and so wouldn’t be eligible for a credit card through the normal channels, a student credit card is designed to ease them into the world of money management and teach them about responsible spending. Would you give your teen a credit card?