I gather by the number of posts and notes we got from readers about the new Motley Fool X-Treme Visa for teens that you don't think it's a very good idea.
Good news: Neither do we.
The Fool X-Treme Visa never got out of the gate, despite boasting first-ever industry innovations such as "X-Points" (which can be applied to facial piercings and discounts at nationwide body-art chain Rat-A-Tat-Tattoos), X-Treme credit limits for teens starting at $5,555, and sparkles. We launched the fictional Fool product with a main-page announcement on -- and this is key -- April 1. Our national holiday.
Outraged readers protested on our Foolish Feedback discussion board. "Have you completely lost your mind??????????," summed up one Fool. Our sales tactics were called to question: "I'm really shocked, and frankly disappointed, that Motley Fool, which seems to have a conscience, would do so... and even more aggressively than the others, at that.... Of course, you'll make money. It's a slam dunk! But, who wants to make money off of our nation's vulnerable youth? Can you really sleep when you do that?"
Our nation's vulnerable youth has a lot of watchdogs out there. "Reality shows that teens often want to make unwise purchases based on emotions and peer pressure. Now you want to make it possible for them to satisfy those immature desires and end up in big-time debt," wrote a concerned reader. Echoed another: "I believe your new idea is completely absurd. It has already been proven that most adults cannot properly handle their credit cards. So what makes you think that teens can?"
Others looked even further into the future, where they saw their own finances affected by the Fool X-Treme Visa: "I'm furious at your suggestion since I am a parent who may have to assume that debt, someday," wrote one dismayed dad.
There were many Fools who played along: "I certainly can't wait a minute to get two or three of these cards for my two teenagers so they don't have to keep asking me for money!" wrote one.
Fool community member CrazyOtto saw the genius of our new product: "It never ceases to amaze me how you guys at the Fool can spot seemingly obvious market niches that other companies miss."
Alexcouchman pointed out some holes in our marketing plan, where we announced that we would market the X-Treme Visa in high school cafeterias, Forever 21 dressing rooms, and movie theater parking lots. He wrote: "Shocked. Shocked and dismayed.... Your constituents expect more from you. How can you possibly consider yourself a reputable marketer when you fail to include urinals, airplane banners, or the Goodyear blimp to promote such an important product. Keg parties is a cool idea, though."
Another questioned our spell checker: " You misspelled X-Treme."
A few Fools cried ageism. "Why do the kids get all the good deals?" asked one. "I resent the age discrimination, just because I'm over 50. I want sparkles on my new X-Treme Visa, dude."
But all joking aside (unless you're pulling my leg), readers continue to post their protests well after the gag ended. Just yesterday a self-described concerned parent posted the following: "I for the most part have always been very encouraged by information I receive from Motley Fool, until today when I read your article influencing teenagers to get into debt and start a life of continuous digging," he writes. "There will be very limited investment in the future if the next generation or two has all debt and no money for investment."
You'll be relieved to know that we couldn't agree more.
The truth is worse than fiction
So which parts of our story were fact, fiction, and just plain Foolishness? Most of the statistics about teen credit card use in the story were true. Funny how just a slight spin-of-phrase can create a seedy marketing opportunity.
For example, it is true that under current lending laws anyone under the age of 18 cannot get a credit card without a co-signer. Also true is that the average high school teen spends $66 a week. (On what, we don't know.) And we weren't pulling anyone's leg when we said that 80% of college students carry a credit card. We actually neglected to mention that a study by student loan lender Nellie Mae found that 54% of freshmen have a credit card, and that 92% of sophomores are packing plastic.
Thankfully, most lenders do indeed offer young borrowers a narrow credit limit. (The Fool X-Treme Visa's initial $5,555 credit limit irked a few folks out there.) According to lending industry watcher Cardweb.com, the average credit limit for college kids is $500. But crafty co-eds have found a way around the spending limits by applying for multiple cards to gain access to more credit. Nellie Mae's study found that of the students with credit cards, 47% carry four or more cards.
If you're looking for spending restraint among teens, don't hold your breath. As we said in our April Fool's article, graduating seniors owe an average of $3,000 -- which is indeed one-third of the amount of debt owed by the average American household that has at least one credit card. Nellie Mae found an even more shocking scenario: More than 20% of the undergraduates it surveyed were burdened by balances between $3,000 and $7,000. We purposely skirted the whole youth-bankruptcy issue. After all, how could we woo teen credit card customers while also pointing out that the under-25 crowd has the fastest-growing rate of bankruptcy in the country?
I did poke fun at the lending industry a bit by citing fake focus group stats. I wrote that 9.47 out of 10 teens like to shop, and that the figure shoots up to 9.48 by the time teens reach the age of 18.2 and head to college.
One particularly alert reader spotted some errors in my made-up math. None other than my cousin, James Greene, who you might remember was described in the article as the marketing manager of the new Fool Plastics division, was irked that I fake quoted him incorrectly. He wrote, "The number of teens that like to shop goes up to 9.49 (not 9.48) by the time teens reach the age of 18.2 and head to college. (It's really 18.176, but I'll let your writer pass on this one.)" He added that, after he gets teenagers signed up for credit cards and started in a lifetime spiral of debt, he's going to get them all haircuts.
Cheeky runs in our family.
Having "the talk"
Readying your offspring for the real world of money management requires a bit of education before they reach the age of credit consent.
If nothing else, remind your child that punctuality counts. In fact, one's payment history (if you pay your bills on time or late) makes up about 35% of your credit score. Get it wrong by missing payments or spacing out on buying stamps and mailing them three days late, and prepare to get hit with up to a $35 late fee and a longstanding bruise on your credit record.
The lessons might go out the window once your little precious hits campus, where T-shirts, pizza, football phones, and pretty co-eds are used to hawk credit cards. Despite the lack of a job and credit record, students are approved for the low line of credit based on future earning potential and their parents' financial strength and protective instincts. (Who's not going to bail out a tearful child in real trouble?)
Let's not put all the blame on the industry, though. A credit card can be a convenient tool that helps a co-ed establish a good credit record. But it's up to the user not to abuse it. No matter what enticements are thrown her way -- including convenience checks, raised credit limits, free Frisbees -- it's up to your card-toting teen to set her spending limits.
Oh, and don't worry. The Motley Fool X-Treme Teen Visa has been tabled. At least until next April 1.
Dayana Yochim was a late bloomer -- she didn't get her first credit card until she was 21. For a good time, check out all our articles from this April Fool's Day. The Motley Fool is card users writing for card carriers.