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Who's liable for underage credit card debt?

A 15-year-old charges up $2,000 -- who pays the balance?

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To Her Credit 
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).

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Question for the CreditCards.com expert

Dear To Her Credit,
When I was opening the mail, I found a credit card bill from a bank I didn't recognize. I was shocked to see a $2,000 overdue balance on an account in my 15-year-old daughter's name. Molly admitted getting the card without our permission, and apparently she's been taking the statements from the mailbox before I find them every month. She doesn't see how she could have spent $2,000 -- she swears all she bought were some clothes and a few gifts for her friends.

Molly doesn't have a job, and my husband and I can't afford to pay this bill ourselves right now. Are we liable for the balance?
-- Susan

Question for the CreditCards.com expert

Dear Susan,
No, you are not liable for the balance on an account you did not authorize and that does not have your name on it. You and your husband are generally not liable for Molly's credit card debt or any fraud committed in getting the card unless the court decides that you were in on the deed or that you were negligent as a parent.

It's widely known that minors can't be held to contracts. This may seem like an open invitation to teenagers to apply for credit and make purchases they cannot pay for. However, before they head for the mall, they need to know what can happen in this scenario.

If the credit card company gave Molly a card knowing she was under age 18, they cannot hold her to the credit card contract.

However, if Molly misrepresented her age when she applied for the card, she can't be held to the contract, but she can still be liable for the balance and face criminal charges. Likewise, if Molly used the Social Security number of someone over age 18, she committed identity theft. Signing an unenforceable contract is one thing; fraud is another.

Many credit card companies will not try to collect from a minor, but legally they could take her to court (state laws vary). Molly needs to understand the seriousness of being charged with criminal conduct, even if all she did was claim to be 18 when she was not. Being a minor is not a defense against fraud.

Even if the credit card company does not pursue charges, you can use this experience to teach Molly a valuable lesson in responsibility: We pay for the things we buy.

  • First, if Molly spent much of the money on clothes, she should return as many as possible. She can't possibly have worn them all already -- chances are, they're stashed in the closet with the tags on. The same goes for any electronic gadgets still in new condition. If she bought gifts for her friends, she can ask for them back.
  • After Molly has taken everything back she can, she should try to sell anything not returnable. Lightly used clothing and electronics sell easily on eBay.com. Send the proceeds to the credit card company. In my opinion, Molly should not keep anything she bought with this card unless she pays for it herself.
  • The remaining balance is up to your discretion, if the credit card company doesn't press charges. Perhaps Molly can work off her debt by baby-sitting or mowing lawns. You may want to help her with monthly payments if she does extra chores.

Years from now, Molly as a young adult may be way ahead of her peers. She's already learned how fast card balances rack up! Plus, she knows how much work it can take to pay it off. A mistake at this age can actually save her grief later -- if she learns the right lesson from this experience.

Sally Herigstad writes about women and credit every week for CreditCards.com. Herigstad is a writer and finance consultant for MSN Money, a personal finance software product. She is also a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Her website is http://helpicantpaymy bills.net. Sally Herigstad lives in Kent, Wash., with her husband Gary. They have two grown children, Valia and Grant.

To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.

Published: May 30, 2008


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