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Student credit cards and young credit

Prepaid debit cards for the youth market

Summary

Learn how debit cards for teens can be good teaching guides when set with prepaid spending limits.

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Prepaid debit cards are targeting the youth market as companies attempt to reach a younger audience.  Card issuers are hoping to tap into teen spending, which totals about $175 billion annually, as they expand beyond the saturated world of credit cards for adults.

While cash back credit cards and reward programs appeal to adults, to attract the interest of their children, prepaid debit cards (which carry a spending limit, and unlike a credit card, need to be loaded with funds before they are used) in recent years have featured the images of such pop icons as Usher, Hilary Duff and Hello Kitty.

Card issuers promote these prepaid debit cards as credit cards with training wheels, so that kids can learn how to manage their money before they truly enter the wild world of plastic.  The majority of the prepaid cards feature the Visa or MasterCard logo and look just like a regular card.

Analysts say that as credit card use increases among grown-ups, it is inevitable that kids will also begin to move away from paying with cash.  They note that since it is unlikely their children will ever use a checkbook, it is best not to ignore the issue of kids and plastic.

However, other experts warn that before putting plastic into a youngster’s hands, parents should consider whether their son or daughter will be learning financial skills or instead simply how easy it is to charge away your money.  They note that adults find getting into trouble with credit cards themselves to be very easy, adding that the concrete nature of hard currency makes it easier for kids to understand.

Even so, these critics say that there are benefits with giving kids access to prepaid debit cards.  For example, prepaid cards can be helpful to teen who are traveling on their own, and they can be a way to educate precocious tweens who are already comfortable with managing their own money in cash.

And, many prepaid debit cards come with safety features to help kids avoid the potholes so common to paying with plastic, such as allowing parents to monitor their child’s spending.  Other cards allow the parent to give authorization for online use and are rejected if the cardholder attempts to use it at adult-oriented websites.

Before applying for a prepaid debit card, it is a good idea to read the terms and conditions, since the fees for reloading, maintenance and over-the-limit fees can add up.

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Published: March 2, 2007

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