- A new website or "service" gives anyone "virtual credit," but the service's main target is kids
- Parents need to decide if this a good idea or not, and be aware your child may be using it
- Good idea or not, the service raises few legal issues
- There are alternatives to teaching your child good money management skills
You've heard the saying, "money makes the world go round." When you think about it, it's "credit" that keeps things turning. Used wisely, credit is a powerful and useful tool. Used unwisely, it leads to financial disaster.
A new website unveiled in February 2010 makes some credit easy for everyone, and that may be a problem for some parents.
Kwedit gives anyone the power to buy virtual or online goods and services either by:
Paying Directly. This is when you "pre-pay" for "Kwedits" to use online later. With Kwedit Direct, you can go to a 7-Eleven store, mail cash in a pre-paid envelope printed at your computer, or "pass the duck" by having a friend or family member to pay directly with a credit or debit card.
Promising to Pay. With a Kwedit promise, you get the virtual goods or services immediately in exchange for your simple promise to pay the money later. Again, you can pay later by visiting a 7-Eleven, mailing payment, or passing the duck.
You can't buy food, candy, or clothes with Kwedit. Rather, it's for things like online games, such as FooPets, where you buy imaginary pets and feed and care for them by buying imaginary food and vet visits.
With the "promise to pay," you start out with just a few dollars of kwedit. As you keep your promises to pay, you're able to borrow more and more on your promise, and you even start building a "kwedit score."
Kwedit screams "kids," from its cutesy name to the types of goods and services you can buy with your credit. Even though adults can use it (yes, there are adults who play online games and don't have credit cards), the site admits it's designed for children 13 and older. And despite it's self-description as being a teaching tool, there are concerns.
Is it a good idea to let a 13 year old buy things online on a promise? Does giving her the option of "passing the duck" to you or another adult really teach her anything about credit and money management. These are questions only you can answer.
A big concern should be the fact children can use it without their parents even knowing about. Children can simply make a promise to repay, print out the voucher, and take it to 7-Eleven or mail it. What happens when they've racked up more than a few dollars in promises-to-pay and then want to "pass the duck" to a parent?
More likely than not the parent will agree to pay. And if for some reason the parent's credit card payment is late, that $5 bag of virtual dog food costs him $40 in late fees and a negative entry on his credit report.