For those of you with teenage kids, would you trust him or her with a credit card? Credit cards come with a lot of risk and a lot of responsibility, as we have seen from the millions of Americans now in credit card debt. If grown adults have enough trouble with credit cards, are your teens really mature enough to handle a credit card? If you answered no, there is a better solution for your kids to learn financial responsibility but without the dangers of a credit card.
Pre-paid debit cards work similarly to a regular debit card but can be purchased from a store or online. Once you sign up, you can put money onto it online or over the phone; the amount required varies between providers, but many can be as low as $25-30. You can then receive statements if you choose, and may reload the card as necessary. These cards can also be canceled if stolen or lost.
Here are some advantages to getting your son or daughter a pre-paid card:
1. Your teen can use it online. Many teens have online accounts for different stores, games, video streaming and so on. If you are worried about your teen using your credit card for these items, a pre-paid card makes more sense. It processes online like a credit card, but there is no interest. If your child has a smartphone or tablet, many cards offer personalized online IDs and facilitate spending on apps, games, and other media.
2. It’s safer than cash. Your teen probably purchases most of their clothes, food and entertainment with cash. Unfortunately, not all teens are safe with their cash. If he or she was to lose a wallet, purse or backpack the money inside will likely be gone forever. If the pre-paid card is lost, your teen can call and cancel the card with no harm done. This can give you a peace of mind when your child is out and about on their own.
3. It teaches your teen about earning and budgeting. Credit cards can teach questionable lessons about budgeting. Swiping the card without thinking leads to overspending and a high balance. Pre-paid debit cards teaches kids that money must be earned before it is spent.
4. You get the control. If you still give your teenaged kids an allowance, one of these cards can put you in control of how much they spend. If you have talked about savings as part of his or her budget, you can put some money in a savings account and the amount for spending money onto the debit card to avoid your teen dipping into savings. Many pre-paid cards also require authorization and access from parents, so you are able to check the balance and spending history, which can open up a discussion about budgeting.
Courtesy of Money Crashers
http://www.moneycrashers.com/prepaid-debit-cards-teens/
