BUSINESSES don’t let 13-year-olds pay for purchases with a promise. At least they didn’t before last week.
Sites like FooPets let minors buy virtual merchandise like pet food if they agree to pay later.
A new payment option for anyone without a credit card or a debit card, no matter how young, has just become available. It’s initially offered by FooPets and Puzzle Pirates, online game companies that are business partners of Kwedit.com, a start-up based in Mountain View, Calif.
Minors as well as adults can buy items in the games with a “Kwedit Promise,” which can be paid off later in a number of ways — with a credit or debit card, for example, or with cash sent in a mailer that Kwedit supplies.
(http://www.nytimes.com/2010/02/07/business/07digi.html?ref=business)
This article initially took me aback - the idea seemed like an easy way to get into debt. However, the article goes on to make an interesting point - that such a system (Kwedit starts out with a very low "Kwedit limit" that increases as the balance is successfully repaid) is a way to become familiar with credit early.
It's good that they do have a limit. I feel that the system could otherwise be very dangerous for kids to have access to. I suppose it does make sense to introduce people to the credit system early on; maybe a program like this could encourage better understanding of credit.
ReplyDeleteI definitely agree; knowing how credit works early is very important. But I feel like there should be a way for children to do so without spending actual money. It's a start, but I also think that this could be dangerous if it goes unregulated.
ReplyDeleteI agree with Rick that knowing how credit works is important to learn at a young age but at the same time I'm flabbergasted. A company is allowing children to make promises they may not be able to keep. Young children don't understand how paper money works. You could trade a child 50 pennies for one dollar simply because they only see the bigger number. Start with the basics of money, then work with credit. E
ReplyDeleteI agree with Rick that this is a little early to start teaching kids about credit. I remember a kid in my high school who was 18 and had racked up something like $10,000 of debt. Maybe these places would help teach kids about credit earlier, or maybe the fact that it's called "Kwedit" would make kids take it less seriously.
ReplyDeleteThe only way I see this working to teach kids how to be responsible with credit is if the initial credit limit is very small. No more than $50-100. The problem with that is that the businesses won't get much money. Also, I can definitely see kids hoping to have the money, then when they don't have it they just beg their parents to pay their balance and they don't learn anything. At least, that's what I probably would have done when I younger.
ReplyDeleteIn a way I've been doing this kind of thing with my parents all my life. It's just borrowing money. I still borrow money from my parents with the promise to pay them back. I'm doing it with tuition. The problem is that some part of me always knows that if I can't find a job after college, or something bad happens, my parents will understand and perhaps forgive some of my debt. I don't see most companies doing that for child borrowers. And someone is going to have to pay for that.
It seems pretty silly to me that we teach younger and younger people to be dependent on credit cards. In other countries, cash is still the most commonly used payment method. It seems to be a american phenomenon to use credit cards so commonly. The idea of teaching minors to use credit cards virtually can only lead to more and more people growing up without a firm grasp on the value of saving money. I worry about raising a generation of children who have no idea about how to go about with money.
ReplyDeleteLetting the new generation of kids pay for purchases with a promise has both its positive and negative sides to it. Like some people mentioned above, letting kids have a gasp about what it really means to have a credit card can prevent them from going into debt when they grow up but at the same time it can mislead them into thinking that credit cards is a way to have what they want concluding in debt. It’s a good idea that there’s a limit on how much they can actually promise to pay back because it prevents them from spending more than which they actually have. (A.E)
ReplyDeletethe limits imposed on minor's spending is the only way this company stays temporarily out of civil court. I'de like to see how this company WONT get sued for its very questionable practices...
ReplyDeleteHi, I work for Kwedit and I'd like to clarify a few points that I don't feel were adequately addressed in the New York Times column:
ReplyDelete-you must be >13 years old to use Kwedit. This is not an offering for younger kids, it's for those who are the primary users of social games (teens and young adults in their 20s)
-most Kwedit limits are between $3-$5.
-We absolutely encourage parental participation; part of the "Pass the Duck" offering, where a teen can ask his parents to pay a Promise for him, is the option to require the teen to share the details of his online spending. We also offer many resources on the website in our Parents section to help encourage conversations between teens and their parents.
-If a Kwedit user does not pay back a Promise, the only consequence is that the user will not be able to use Kwedit again with that game. There are no real world consequences and no ties to real word credit scores, like FICO. The incentive for a user to pay back a Kwedit Promise is that she can then get more Kwedit to use the next time, and her Kwedit Score will rise.
I hope this helps to address some concerns that were raised. Please feel free to contact me at loree@kwedit.com if you have any questions.
Just pointing out the paragraph at the end article mentioning that the debt is non-binding: "The Kwedit Promise is about as real as a FooPet. Even the company says that it’s just marketing and not an enforceable contract. But Kwedit is a way to become acquainted with credit early, while still on training wheels."
ReplyDeleteThat's not to say I agree with the practice. I generally agree with Hannah's post.
Wow. The company monitoring where discussions of its product comes up even in a class econ blog doesn't really instill much trust. Though she does bring up the same point I made above.
ReplyDeleteIn general, minors cannot be bound to legal contracts without parental consent.
Very interesting; what happened in this blog.
ReplyDeleteOne point I can raise is that maintaining good credit in adult life is an incentive because your credit determines what you can do on more than one important occasion - buying a house or car, establishing a checking account, etc. But the good credit is not the ONLY incentive adults have. They also accumulate debt and interest if they do not pay things back - the other and - I would argue- more prominent incentive to keeping a good credit score. I doubt a 13 year old can be encouraged by the incentive of maintaining "good credit", if it only applies to one internet game, and there are no real consequences.
I do think that if this is successful in creating young teens who keep good credit for a game, it would be a huge educational step towards a smarter consumer nation.
This would be a useful game to play in schools. (ATE)
I also agree that it is important to become familiar with credit and how it works before they get older and in to trouble. With such small amounts I feel that this could be a good learning tool for many teens. A
ReplyDeleteSeems to me it is a good idea. I mean I know many people who have horrible credit and because of that, can't get loans for some things the need. Especially in this economy, a good credit score is a must have and if this helps children learn how to be careful with money and teach them how not to get into debt. The only question is if it will work.
ReplyDeleteI really agree with Corrine. The lack of consequences will cause children to not take it seriously and treat it as another game.
ReplyDeleteThe sad thing is, this is a pretty good idea for a company; just at the expense of the kids.
I like this idea very much. I feel that it is a good idea to help get people used to credit or debit early. Especially getting people used to paying their bills on time. Many people have been subject to credit card debt, and if they had the proper training on how to deal with payments they perhaps wouldn't be in the predicament they find themselves in.
ReplyDeleteHmm, not sure how I feel about this whole thing. While I defintiely agree that it is very important to teach kids how to use a credit card and such, I don't necessarily think that this is the best way to go about it. However, I do understand tht there are, unfortunatly, a lot of parents who probably would not take the time to teach their kids this information.
ReplyDelete