What to teach your kids when Facebook and other online companies are trying to scam them out of money

Are online games scamming your kids—and you?

“Facebook encouraged game developers to let children spend money without their parents’ permission—something the social media giant called ‘friendly fraud’—in an effort to maximize revenues, according to a document detailing the company’s game strategy. Sometimes the children did not even know they were spending money, according to another internal Facebook report. Facebook employees knew this. Their own reports showed underage users did not realize their parents’ credit cards were connected to their Facebook accounts and they were spending real money in the games.”

Facebook knowingly duped game-playing kids and their parents out of money, Reveal (from the Center for Investigative Reporting), 1/24/19

“Mom, what’s your credit card number?”

That’s the innocent question at the heart of this laudable—and disturbing—report by Reveal. This story brings to light blatant evidence, in the form of internal emails and other documents, that Facebook deliberately profited off kids who inadvertently made in-game purchases with their parents’ stored payment information while playing otherwise free games on the social media platform.

And it gets worse: Facebook discouraged third-party developers from including safeguards that would prevent this—like prompts to enter a pin code or password to access in-game upgrades kids might not realize are pay-to-play. Yet families who lost hundreds or even thousands of dollars received no refunds from the social media giant. Some took their complaints to their credit card companies; others went to the Better Business Bureau. One 12-year old was aggressively deposed by Facebook’s lawyers when his family tried to sue.

All over a bunch of “magic” coins, strength potions, super-swords, and Angry Birds power-ups that drained very real money from very real accounts.

In 2016, Facebook quietly implemented a refund protocol for so-called “minor purchases.” But even though Zuckerberg & Co. won’t be taking your money for fantasy upgrades anymore, the internet is still rife with “freemium” games that hook players with basic gameplay and free downloads before pushing new levels and abilities that are behind a paywall.

The personal finance takeaway here? First, the no-brainer. Don’t give your kids carte blanche with your credit card info, whether their desired purchases are physical or digital. Of course, as the Facebook case illustrates, that simple advice might not be enough; well-meaning parents who handed over the Visa for a “just this once” buy didn’t always realize their details were stored on the platform.

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Kids need to know what it means to use a credit card. I’ve got anecdotes stretching back to the pre-digital era about mortified parents of kids who think that credit cards are “free” or “magic” money. Some adults are duped into this mindset, too. Credit cards exploit something programmed in our brains; research has proven that paying with cash feels more real—and painful—to us, and we spend less with bills and coins than we do when using plastic.

Swiping a card can feel magical, not unlike spending gold coins on an armor upgrade for your elf warrior. But credit card spending has very real consequences—like interest, penalties, and credit score downgrades. This reality is obscured in the world of in-game purchases, where kids are also facing a powerful marketing and engineering apparatus designed to turn their clicks into revenue.

My suggestion? Plan a device-free sit-down with your kid to explain that a credit card is a loan—not a game. (Have a credit card statement on hand for ready reference.) While you’re at it, get your kid’s wheels turning by talking about the tricks marketers use to manipulate us into spending. In a world where our attention is constantly monetized, you’ve got to start young to be a smart consumer.

Update 2/25/19: Sens. Edward Markey (D-Mass.) and Richard Blumenthal (D-Conn.) are calling for an FTC investigation into Facebook’s “friendly fraud” practice. “Facebook’s answers to our reasonable questions were inadequate and do not inspire trust,” the senators said in a statement.

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