FOOL ON THE HILL
Hannah Gets a Visa Card

The pool of fresh credit card customers is pretty slim, forcing the lending industry to target younger and poorer populations. So how do you explain the concept of a credit card to a six-year-old who just got her first Visa card? Dayana Yochim gives it a shot.

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By Dayana Yochim (TMF School)
March 27, 2002

A friend of mine took her daughter Hannah to "Kindergarten Roundup" the other day, a thinly disguised cuteness competition to get kids into the best kindergarten class. When they got home, waiting in the mailbox was Hannah's first piece of junk mail. (Second, actually, if you count the free AOL hours she was offered the week before.)

Evidently, little Hannah was deemed creditworthy by someone in Delaware (state slogan: "You got a business? We have lax laws! Incorporate here!"). She was anointed with a $5,000 line of credit and a shiny new plastic card to go nuts with it.

Hannah had arrived. Hannah couldn't really count very high or sign her name in cursive on the back of the card, but she had arrived.

After her mother picked up her purse, keys, the four-year-old son, and the sippy cup she dropped, she called to give me the news. Since credit cards are my specialty and I have a way with kids, I quickly rushed over to help sort things out.

I went upstairs to Hannah's room where she was wild-eyed in the knowledge of her new purchasing power. "Hannah... what have you got there?"

She held up her new Visa card. "Look! It has sparkles!"

Wow. These people are good. I looked around the room for the envelope -- pink and emblazoned with pony stickers, I assumed. I turned back around to find Hannah dressing her Barbie doll for a trip to the mall with a postage stamp-size Prada knockoff purse, Ken, and the new, glittery plastic accessory (proportions don't really matter in Barbie's world).

"No, sweetie, it's pronounced 'Vee-sah.' Not 'Free-sah.'" Kids say the darndest things.

I started to explain. "Hannah, this isn't a toy. It's a highly sophisticated financial tool that enables grownups to purchase goods and services through a far-reaching electronic network of retailers and lenders."

She looked at me and blinked.

I turned it down a notch: "Grownups like your parents use it for good. Visa helps them keep track of how many ice cream cones they buy, and it saves them time because they don't have to stop at the bank every week before dance class. But Visa can also be a very bad thing that makes grownups spend more money than they have."

"I'm all grown up!"

"Well, yes, you are!" At least according to the man stuck in a cubicle profiling demographic credit risk trends. He must have been thrown by Hannah's unicorn sweatshirt, pink tennies, and thin credit history.

"You see, Hannah, there's a man who spends all day in a dark office cubicle thinking of ways to put people under his magic spending spell. Then he dispatches a group of busty marketing assistants, er, I mean fairies, to sunny college campuses across the land to hand out T-shirts and Visa applications to pimply teenagers training to be sorcerers." (Sometimes it's best to candy-coat the truth for kids.)

"Does Ben get a Visa?"

"No, honey, your brother is only four."

I could see that Hannah wasn't getting it. I tried a different approach. "Hannah, how much money do you have in your piggy bank right now?"

"$6!"

"When you go to the store to buy Barbie a friend, if you pay for her with your new Visa, her friend will cost $1,087 and won't be paid for in full until you're 43."

"Barbie is pretty."

"Well, yes, she is. Hey, does she have matching boots for this outfit? Never mind. You see, when the bill comes in the mail next month, you won't have enough money to pay the nice people back the money you borrowed to buy a friend for Barbie."

"I get more mail?!"

"Well, yes. Actually, you'll get A LOT of mail now. Approximately 672 solicitations a month now that they know your name, sweetie."

"Yay!" Hannah called downstairs. "Mommy? Is there more mail for me?!"

"But that's not the point. You see the Visa people are not giving you the money for free. They are letting you borrow the money from them. You have to give it back out of the money you get for allowance. The longer it takes you to earn your allowance to pay them back, the more money you have to give them to keep them happy. Then one day the transmission on your Honda goes out and the water heater at home decides to follow suit. Suddenly you have to pay a lot of people a lot of money just so you can have a way to get to your dead-end job and come home to a mess because no one but you knows how to put things back where they found them."

Since kids have a short attention span, I knew it was time for a break. I called downstairs for reinforcements: "Kristen, we need two juice boxes and six Twizzlers, stat!" Hannah's mom is a doctor so she knows what I mean when I use fancy terms like "stat."

Now, where was I going with this? Oh, yeah. "So you pay for a new transmission for your crummy car and for the nice man to hit the water heater with his wrench and charge you $85 an hour. Since you don't have the money in your piggy bank to pay them, you give them your Visa card.

"The Visa bill comes in the mail the next month -- yes, you get more mail -- and you open it up and your jaw drops when you realize you have just 20 days to scrape together your nickels and quarters to come up with $2,048.77 to pay back the nice Visa people for letting you borrow their money to pay the car repair shop and Marty."

"Who is Marty?"

"He's the plumber. But that's not important now, because you have this huge Visa bill and an empty piggy bank and all of your friends are going to upstate New York in 10 days for a relaxing weekend. Only now you can't go because gas prices have started to rise and you decided not to go into PR after college where you could have earned money hand over fist, but, noooo, you took the low-paying high road and became a reporter..."

"Can I have one of your Twizzlers?"

"Of course." At this point, I sensed that Hannah was a little weary from our Visa talk (you have to really know kids like I do to spot the telltale signs). It was time for Plan B.

"Hannah... why don't we cut this Visa in two so that it fits into Barbie's purse?"

"Okay!"

Dayana Yochim pays off her Visa bill every month and takes every opportunity she can to play with toys. She owns no companies -- or Barbies -- mentioned in this article. The Motley Fool's magical disclosure policy was written by elves. And unicorns.