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Think twice before lending your credit card -- or it will cost you big

Letting friends, family borrow your plastic can lead to big headaches, debts

By

Opening Credits
Columnist Erica Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

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Question for the CreditCards.com expert

Dear Opening Credits,
Over Christmas, I let my 14-year-old daughter buy some presents on QVC with my credit card. I just got the bill, and it is almost $700. I told her she could only spend up to $200! She gave away the stuff as gifts, so I can't get them back. I heard that kids can't be responsible for credit card debt. Is this true? How do I tell QVC that I am not responsible? Thank you for your help. -- Marissa

Answer for the CreditCards.com expert

Dear Marissa,
How do you inform QVC or your credit card company that you aren't responsible for the debt? You don't.

Because your question concerns the law, I presented your case to Orlando-based credit attorney Walter F. Benenati. His take: "Generally, a contract with a minor and another party is a voidable contract. However, this contract was performed, so it will be difficult for a judge to determine you do not have to pay." He explains that there are three parts of a contract: offer, acceptance and performance. "There was an offer by QVC, acceptance by your daughter when she bought the merchandise and performance by QVC sending you the merchandise."

It would be another thing if your daughter used your credit card without your knowledge, but you authorized her to use it. The only way for you to legally escape paying would be if a crime had been committed, but in the situation you describe, none was. Even if she did use it fraudulently, you'd have to file and press charges against her -- for a relatively small amount of money, dragging her into court wouldn't seem reasonable.

Consequently, Marissa, the bill is yours.

Some serious mistakes were made, though. They include:

  1. Allowing someone else access to your credit card. Your primary misstep was handing over your credit card to your daughter. The card has just your name on it, right? Then you should be the only person to have access to it.
  1. Not monitoring her shopping activity. I can see how you would have said, "You want to buy gifts for some friends? Great, let's do it together!" But walking out of the room as she begins to call in her orders wasn't advisable. I believe that you told your daughter the limit, but she either didn't hear you, didn't care, couldn't control her impulses or -- well, who knows? It doesn't matter. Being present and guiding her to the total you were comfortable with was essential.
  1. Distancing both of you from financial accountability. Several products were sent to your daughter or, perhaps, directly to her friends. It's neither QVC's nor your credit card company's fault that the sum is uncomfortably high. Rather than seek a way out, you both must assume responsibility for the problem.

While it's important for you to look back and identify what you did wrong, try to not dwell on the past. It's time to change and recover.

I suggest you have your daughter call her friends and ask for the items back. Embarrassing? Unquestionably. But if you want to reduce the bill -- and teach her a lesson she'll never forget -- it's an idea.

Then pay the balance off as soon as possible. If you can't manage the full amount right away, break it up into three equal installments. Credit card debt is not supposed to be long-term. Stretch it out for longer than a few months and the finance charges get ugly.

Next, have your daughter repay you. You were OK with her spending $200, so she owes you $500. She's a bit young to send out for normal employment, but I bet there are plenty of things you can find for her to do around the home that go beyond her average daily chores. Ascribe a value to each task and have her work the balance due off. For example, washing the car may be a $20 job, scrubbing out the cat litter boxes $10.

During this time, actively teach her the value of money and how credit works. If you're shaky on the basics, there are plenty of great books on the subject. Also let her in on your finances by explaining how much you earn and where your money goes. Consider this a perfect opportunity to provide your daughter with skills she'll be putting to use in a few short years.

See related: 8 things you must know about credit card debt

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Published: January 20, 2010


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