There is a growing trend for parents to add their teenagers as authorized users to their debit and credit cards. I see this as an excellent opportunity for credit unions to market to members (the parents), and then nab new members (the children) as they come of age. Here is why: Remote Control Card Management.
US News and World Report wrote an article a few months back that looked at the pros and cons of giving teenagers this authorized access. They noted these benefits:
- Benefit No. 1: A debit or credit card could help build your teen's credit score. There is no better way to build credit than by opening up a credit card – the sooner the better as the length of your credit history usually helps increase your credit score. Hence, signing teens up early can be a big advantage for them.
- Benefit No. 2: Teens' purchases will be protected. It's common for parents to give their children cash to carry around just in case of an emergency, but cash is more susceptible to theft or loss. Debit and credit cards are better protected against unauthorized charges than any other form of payment – the user has zero liability in these types of situations.
- Benefit No. 3: Parents know what their teen is buying. Debit and credit cards can be used as a tool to monitor where a child is spending money. This can give parents insight into a teen’s life that they may not otherwise have.
- Benefit No. 4: Teens will learn budgeting skills. Debit and credit cards can be a great way to teach kids money management skills and financial responsibility. Ideally, they will learn to manage spending and never miss a single payment.
The Risks Can't Be Ignored, But Can Be Your Competitive Advantage
Giving a child a debit or credit card may seem like a great idea when you read the benefits above, but there are quite a few risks that should be considered and relayed to your members. Even if the parent is a responsible card user, they will be vulnerable by putting so much power in the hands of a minor. If their teen (the authorized user) makes a late payment, or if any other problems arise, the parents' credit score will be negatively affected. If they're looking to get a loan in the near future, the benefits of raising their child's credit score might not outweigh the risk to their own credit score.
Also, no matter what kind of purchase a child decides to make, the parent(s) will be fully liable for all charges at the end of the month.
This is where your credit union can come to the rescue! Offering Remote Controls for cards can allow parents to give their children the benefits listed above, but minimize the risks. If a child has to call their parent when they want to make a purchase, the parent can use their mobile phone to turn the card on for the purchase to take place, then promptly turn it off until needed again.
A teenager has a hard enough time remembering where they put their homework, so having the card turned off when it is not needed can give the parent peace of mind that their credit is safe.
As a credit union, you can offer this service to members through FLEX and their card processing provider. Mobile card management can also allow your credit union to nurture that next generation of members, allowing them to get to know your credit union and allowing you to gain their trust. Read our case study on Remote Controls for Cards and how FLEX gave HALLCO CU this competitive advantage in their market.
