Children and Online Use of Parents’ Credit Cards
Over the past four decades, the Internet has changed the way we live and work; it’s brought people from all over the globe closer together via social media and made many aspects of everyday life easier — perhaps a bit too easy, some parents would say. Online shopping is as commonplace these days as a visit to the shopping mall was in years past. Yet, for all of the convenience that the World Wide Web provides, the ease with which almost anyone can now purchase goods and services does have its drawbacks.
With easy access to online stores selling products and services, young children and teens have a great deal of temptation staring right at them from their smartphone and computer screens. But without readily available credit, much of what can be purchased online, by anyone much less a youngster, is generally out of reach; however, when some kids manage to get access to a parent’s credit card, unauthorized purchases can become a very distinct possibility.
If any of this sounds familiar, it should. Close to half of all parents reported that their kids secretly used that adult’s credit or debit card without asking, based on a survey in 2022 by LendingTree.com. And the number of parents affected by unauthorized credit card use rose by nearly 60 percent from just four years prior. Of course, this should not be surprising thanks to a general increase in in-app purchasing and one-click ordering, especially in households where families tend to share their mobile devices and passwords more freely — on average, about one in five parents have designated their child as an authorized user on their credit card.
Yet, according to Lending Tree, even those parents who allowed their kids to use their credit cards to make authorized purchases ended up regretting the decision afterward. If parents who have allowed their kids to access their credit cards are finding this to be a problem, it’s not hard to imagine the shock and disappointment of parents who discover that their youngsters have secretly made unauthorized purchases with their cards.
Studies have shown that children who used their parent’s credit card without authorization spent, on average, upward of $500 or more. Furthermore, one quarter of parents interviewed have said that they argued with their child about money over the past month, and more than one in three arguments involved the child’s use of a parent’s credit card without permission.
What’s the Risk of a Kid’s Unauthorized Use of Parents’ Credit Cards?
Despite a parent’s best efforts, the risk of your kid’s unauthorized use of your credit card can range from mild annoyance and potential embarrassment to unexpected debt and possible credit destruction. The most common instances of kids using a parent’s card without permission include 1) in-app or in-game purchases; 2) ordering food delivery; 3) purchases made via voice-activated devices.
Beyond the monetary impact of more mundane uses of a parent’s credit card, a teen who inappropriately uses an adult’s card may himself become the target of fraud, or worse, an online predator. Youngsters don’t have the years of credit card experience that adults do, which means they need guidance in order to develop those skills for the future.
Parents who simply give their children access without properly educating them may end up making things worse, and can possibly face an unexpected increase in their credit card debt. This usually occurs because the parents are not keeping an eye on their child’s purchasing habits and are unaware of their teen’s online use of their card.
When it comes to your child’s welfare, the potentially addictive nature of in-app purchasing on gaming platforms can be quite enticing, not to mention psychologically detrimental, and can even lead to an out-of-control spending spree for some kids. The existence of “rare” items in many of these games can result in jealousy for what others have, which in turn can place a significant mental strain on a child who is then incentivized to spend more and more to keep up with the progress of other players. Interestingly, government authorities abroad have been looking into some of these gaming apps to determine if certain in-app purchases — such as required to open up a Roblox “loot box” — qualify as gambling under existing laws.
Although gaming apps such as Roblox give parents the ability to switch off or restrict their child’s spending using the in-app settings, even parents who are well-versed in this technology can’t always curb their child’s unauthorized spending habits. This is because many purchases related to the main gaming app are made using third-party sites and a variety of payment platforms, such as PayPal, Google Play, and Apple iTunes, just to name a few well-known ones. So, even though a parent’s credit card is not linked to the main app, charges can still take place thanks to third-party apps.
Can My Child be Arrested for Credit Card Fraud?
Although a serious offense, a child is unlikely to be arrested due to credit card fraud, mainly because circumstances often dictate the extent of the punishment. Using someone else’s credit card to purchase goods or services — without any intention of repaying the cardholder — can be a criminal offense, but for minors, the outcome is usually far less severe.
And while federal and state penal codes apply to everyone regardless of age, courts will often temper their judgment based on the value (and use) of what was taken. For instance, if a minor child uses another person’s credit card to buy a bunch of candy or take a friend to the movies, he will probably not experience any truly serious consequences; instead, rehabilitation will likely be the court’s primary aim.
For instances of credit card fraud committed by a minor against a parent or other family member, it is important that parents or guardians explain in no uncertain terms the seriousness of the act. If your teenage daughter took your credit card without permission, consider what should be a reasonable — and instructive — consequence for her. This might include withholding the teen’s smartphone or computer for a significant period of time; restricting after-school activity to her bedroom; or requiring her to undertake some kind of labor-intensive or distasteful chores around the house.
Absent police or court involvement, it will be up to the child’s parents to mete out the appropriate punishment. Above all, when considering the seriousness of credit card fraud and the effect it could have on a child’s future development, it is important for parents and guardians to never minimize the situation, and to impress upon their youngsters the gravity of this type of crime.
What Causes a Child to Inappropriately Use a Parent’s Credit Card?
Many ask what would cause a child to inappropriately use their parent’s credit card, especially since we as adults understand that such abhorrent behavior is essentially akin to stealing — not only the parent’s hard-earned money, but also in their taking advantage of that adult’s credit standing and even putting that standing in jeopardy through their actions. Of course, most children don’t consider any of this, which is why the law treats minors differently than adults who commit a similar offense.
Much of this goes to the fascination that teens (and tweens) have with credit cards and the power to purchase almost anything “out of thin air.” By observation, teenagers learn from watching their parents and realize early on that having a credit card can be extremely handy. The draw of purchasing power in one’s pocket can also be accompanied by the appearance of being more adult than one’s peers.
Whether a parent chooses to share their credit card or not, the temptation of having access to instant money can be more than some kids can resist. Handing over a credit card to an ill-prepared teen is not the answer, but even so, some kids will find a way to get ahold of their parent’s physical credit card, or at least access some online method of payment that is linked to that card.
Typically, the lure of merchandise, home delivery of food, and online games are drivers for kids who use their parent or guardian’s credit card without permission. Because of their age and inexperience, teenagers will often make purchases without any planning, which can begin a potentially destructive cycle of impulse buying that can follow them into adulthood. That danger aside, most parents who experience a child’s unauthorized use of their credit card will not necessarily feel the financial pain of a large purchase. Fortunately, many credit card companies have “zero fraud” policies, which can help parents to recoup the price of some online purchases that cannot be returned for a refund.
Are There Laws Preventing Minors from Online Purchasing?
While U.S. federal law — specifically, the Children’s Online Privacy Protection Act (COPPA) — is designed to provide some protections for children under the age of 13, the main goal is to prevent children’s private information from being used by apps and websites, the law does nothing to stop kids from going behind their parents’ backs.
The Children’s Online Privacy Protection Act gives parents control over what information websites can collect from their under-13-year-old kids by prohibiting websites from gathering personal information from a child by any means, including “requesting, prompting, or encouraging” youngsters to submit their personal info online; or, enabling children to make their personal information publicly available in an identifiable manner; as well as passively tracking children via their online activities. The COPPA Rule also outlines ways in which websites and apps can obtain “verifiable parental consent” when it comes to their child’s personal information.
Apps such as Roblox provide parents of younger children the ability to restrict how their kids can interact with others on the platform, as well as the types of games youngsters can play. However many of these controls are optional and children of any age who have access to the platform can, indeed, create an account without their parents’ knowledge and sidestep any parental restrictions. On the Roblox app, accounts set up for kids under 13 years old will automatically default to stricter settings; however, without parental knowledge and oversight, youngsters can easily change those settings if their parent or guardian hasn’t established a parental PIN.
The upshot of this means that the bulk of gaming websites and apps are easily joined — without restrictions — by kids of any age simply by the child stating they are older than they are during the registration process. As with many aspects of the Internet, parents need to be as aware and involved as possible in order to protect their kids from online threats and manipulative tactics, not to mention possible monetary losses.
Are Parents Financially Responsible For Their Child’s Online Purchases?
For the most part, parents typically cannot be held financially responsible for the totality of their child’s online purchases, as long as those charges were made without the parent’s permission. Most major credit card issuers provide what is commonly termed a fraud liability guarantee for instances where an unauthorized purchase takes place. And, so long as the cardholder reports the unauthorized use to his or her credit card company, a parent most likely will not be held liable for an online purchase made by a child. It’s important to understand, however, that under the Fair Credit Billing Act (FCBA), a cardholder can be held liable for a maximum of $50 for a disputed charge.
Typically, a cardholder doesn’t have to pay for unauthorized credit card charges made by family members, at least in most cases. Yet, if someone takes your credit card and uses it without permission, that action is considered fraud — it makes no difference whether the person is a family member, a friend, or a complete stranger.
When credit card fraud occurs, the cardholder should report the incident to his or her credit card company. As part of the process, the cardholder will usually need to file a dispute for the amount of the unauthorized charges, after which, if the card issuer agrees with the claim, the company will issue a refund. Of course, for instances where a child has been listed as an authorized user of the parent’s credit card, any purchases made by that authorized user will not be seen as fraudulent and the cardholder will be legally responsible to pay for the charges made by their child.
What is “Unauthorized” Use?
Surely, if a child “borrows” a physical credit card from his or her mother’s purse and uses the card for an online purchase, most people would agree that the child used their parent’s card without permission or authorization. But handing your smartphone to a teenager and giving her your login information — and hence access to retail apps with your credit card info already saved — tends to be a vast gray area for many parents, as well as credit card issuers. Disputing any purchases resulting from the latter situation may be a difficult argument to win, and certainly stretches the credulity of a claim of “unauthorized use.”
Now, take the above scenario one step further, where a child is listed as the user of an app set up by their parent and paid for by that adult’s credit card or online payment service. This situation leaves much less doubt as to what is or is not authorization from a parent or guardian. Most credit card companies will not hold a parent responsible for charges on a stolen (or “borrowed” card) if that credit card has already been reported missing prior to a disputed charge. However, parents may have a much more difficult time getting a credit card company to cancel a disputed charge when there has been no report of loss or theft of the card in question.
In the end, parents need to consider the type and extent of access to online purchasing that they give their kids, either directly or indirectly. Just as ignorance of the law is rarely, if ever, a legal defense; claiming ignorance of one’s child’s use of your “loaned” device or paid online retail app may not get parents off the hook for some pretty hefty credit card charges racked up by their kids. It’s best to remain vigilant and stay on top of the latest monitoring apps.
Do Gaming Apps and Websites Police Underage Credit Card Use?
Gaming apps and websites don’t typically police the use of credit cards used on their platforms. Their policies usually only address the procedures for in-app and third-party purchases. While these platforms must conform to the law — such as the Children’s Online Privacy Protection Act (COPPA) — oversight of credit card use is not the focus. Even the rules pertaining to users who are under 13 years old are loosely followed by those kids who register, with many intentionally mis-stating their age to avoid COPPA-related restrictions.
Similarly, many of these gaming apps and websites are associated with third-party apps for purchases, which further insulates them from direct involvement in monitoring any potential underage or unauthorized credit card use. Since children are often less accountable for their actions than adults, the lion’s share of the oversight for a youngster’s activity on these platforms falls, again, on the shoulders of parents.
Can Parents Stop Kids from Using Credit Cards Without Permission?
Stopping kids from using your credit cards without permission starts with keeping closer track of both your physical credit cards and any card details that may be stored on your mobile devices or home computer. Kids are pretty smart when it comes to navigating modern electronic devices, often a great deal more than the adults in their lives. If you have already encountered bad behavior on the part of your child, or if you simply wish to avoid any trouble should temptation become too much for son or daughter, here are a few ideas to help protect your credit card information from those close to you:
- Keep your physical credit card in a safe place — Use a lockable filing cabinet, desk drawer or valuables safe to secure your credit cards when they aren’t being used.
- Always be aware of your wallet or purse’s location — Leaving your purse on a hallway table, placing your wallet in a jacket pocket in a closet, or tucking it away in your bedroom or home office may seem fine when you’re in the safety of your own home, but to a child who is tempted to make an online purchase, placing a wallet or purse in any well-known locations may be an open invitation
- Destroy any unneeded receipts and credit card statements — Shred or otherwise destroy any documents that you don’t need anymore that may contain sensitive credit card or bank account information
- Review your charges and auto payments regularly — Make a point to look over your latest month’s credit card bill for any unexpected payments. Also, review your banking account to make certain there aren’t any unauthorized withdrawals or strange automatic payment activity (this is always a good practice even if you don’t have young children in the house)
- Delete saved payment information — Saving your payment information may be a very convenient and time-efficient method when you need to buy something online, but teens have been known to “hack” their parent’s passwords on payment apps and other websites. If you have a youngster who has been taking advantage of your credit card information through your mobile device or computer, it may be best to remove that sensitive information until trust is restored with your child
- Set up real-time credit card use alerts — Have your credit card company send you real-time (text or email) alerts to detect suspicious charges as they happen. Being able to monitor “card not present” purchases or charges exceeding a set dollar amount can go a long way toward curbing a “sneaky” youngster or other family member
- Establish a “fraud alert” on your credit report — Although it may seem an extreme measure, if you suspect your child may attempt to steal your credit card information, by whatever means, you may want to set up a fraud alert with one of the three major credit agencies. Setting up an initial fraud alert is typically an easy task and the alert will remain for 12 months. An extended alert will remain active for seven years, but generally, this longer-term alert requires the cardholder to file a police report
Protecting yourself from fraud is always important, but the root of this kind of behavior is due to a child’s lack of understanding; if he or she does not fully understand the gravity of their actions, the cycle could repeat and, in doing so, reinforce the bad behavior going forward. As parents, we have a responsibility to help our children learn from their mistakes.
This can be done by instilling in your child a healthy respect for other people’s property as well as giving him or her a better understanding of the meaning and value of money, all of which can go a long way toward not only curbing bad behavior now but providing your child with a basic grounding in the function of money and personal finance.
This will hopefully establish a firm foundation for healthy money management skills that should serve them as they head toward adulthood. Some additional ways to introduce your kids to the responsibility of handling their own finances can include the following:
- Giving your child a true monetary allowance — Establishing an allowance can help kids understand, in concrete terms, the concept of money and how to preserve it, spend it or perhaps even invest it. Let your son or daughter “earn” his or her allowance in return for doing household chores. These days, experts recommend that parents avoid digital banking, instead paying out the child’s allowance in actual cash. Starting with coins and bills, take your child to the bank to set up an account to deposit their earnings. Then, financial experts suggest, go to a brick-and-mortar retail store where they can spend their “hard” cash. Once they have a grasp of working with real money, they can then move on to electronic transactions. In this way, parents can hammer home the concept that purchases online are also done with real money.
- Be clear in your expectations — Sit down with your child and have a constructive conversation about the family’s “money rules.” This should include what your youngsters can — and can’t — buy online, as well as what you as a parent are willing to pay for. Make it absolutely clear what purchases they will be responsible for, and that permission to use your credit card must be received before any purchases are made. Finally, be clear on the subject of consequences for unauthorized use of your credit cards.
- Reward responsibility — If your teen demonstrates a responsible approach to your household rules and shows restraint when it comes to online purchasing, consider designating them an authorized user on your credit card. Even so, be sure to closely monitor any and all activity on your credit cards (most credit card companies allow cardholders to track card activity via their website, through apps, and notifications by text or email)
- Try a prepaid debit card — If making your child an authorized user on your credit card makes you nervous, try starting them out with their own prepaid debit card. And, as with credit cards, parents can monitor debit card activity. Like financial “training wheels,” a debit card can be a relatively safe and instructive tool for a young person to use and learn about personal finance