Teen Debit Cards

Are teen debit cards right for you? Having a "prepaid credit card for teens" may not be the best idea. Here's why.

Teen prepaid credit cards are actually just debit cards. The difference is that debit cards are prepaid. The teen card holder (or the card holder's parents) "load" up the card with a desired amount of money. Every purchase that is made is then subtracted from the money on the card. The card holder's spending is limited by the prepaid amount.

I would argue that a prepaid credit cards for teens may not encourage good teenager money management for several reasons:

• High fees are common. The Current Card has an annual fee of $50. Of the cards I have investigated there are many other highly creative fees like:
  • ATM fees
  • Inactivity fees
  • Mail statements fees
  • Overdraft fees
  • Activation fees
  • PIN change fees...and the list goes on.
  As it turns out, the Current Card may end up being the least expensive option even with the high annual fee because some of the other fees are less. Fees are less for most teen credit cards.



• Parents are the ones loading the cards, so why not just give your kid cash?
• Parental controls have been argued to be one of the reasons to go with the debit cards. Although, parents can limit spending and not allow spending in certain categories, having a debit card may actually enable your teen to buy internet porn or other things parents will not approve of.
• Debit cards actually encourage spending. It is harder for teens to keep track of all that magic plastic money, and before they know it, it is gone.

Obviously everyone's situation will be different and there are some positive reasons to have a debit card for teens. (Such as parents can have control over locking and unlocking use of the card, tracking what teens are spending money on is easy, and teen debit card can prepare teens for proper use of a credit card later in life.)

In general I cannot see enough positive reasons for my kids to have a debit card. I would rather set up a teen budget and use cash or a checking account. If a debit card is still something you want, you can always tie the checking account to a free debit card.

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