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Prepaid Credit Cards Can be a Learning Tool

Prepaid Credit Cards Can be a Learning Tool

Your teenager may want the freedom to purchase items online or at the mall without the hassle of cash, and you would like the ability to keep track his/her spending. With a prepaid credit card, you can both get what you want. These products also give parents the power to limit their child’s spending to make sure he or she is not spending frivolously. What’s more, starting your teen with this type of tool will help teach financial responsibility at an early age. Think of prepaid credit cards as financial training wheels, of sorts. In this post, we’ll discuss further how these can benefit your kids.

Why These Are Ideal for Kids

When you think of cardholders, you may envision responsible, wage-earning adults with an established credit history. However, with secured cards, just about anyone can use them fairly responsibly. These are perfect for kids for several reasons. For one, you limit how much they spend each month with the amount of funds you put on the card. Once they exceed this amount, the card is useless. Thus, you can use a prepaid card as a convenient way to give a monthly allowance. Secondly, these are accepted everywhere Visa or MasterCard are taken. Your kid can use it to eat out, make purchases online, or buy clothes at the mall.

A Lesson in Budgeting

The big selling point for parents is that it is impossible for the child to overspend or exceed the card’s limit. Consequently, you can give your child a valuable lesson in budgeting with a prepaid card. If the child knows he only has so much money on it, he or she will learn to use it wisely. Instead of just doling out cash whenever your child asks, you can put limits on their spending and put the responsibility of budgeting in their hands. You also know that your child will always have a back-up for emergencies as long as the card has money on it. One worry that parents often have is that the child will receive a credit rating for the card or the child’s spending habits will be reflected on their own credit reports. This is actually untrue—the activity of these cards do not appear on reports. Just make sure that the issuer does not report the activity to any of the bureaus.

Facts about Prepaid Cards

Usually, prepaid cards come with a one-time sign-up fee, a monthly fee, and then a reloading fee every time the card’s funds are replenished. These fees are typically minimal, and most cards allow parents to manage the funds online. You can even find some offerings designed specifically for kids that block purchases of alcohol, pornography, firearms, and online gambling. In this way, you have much more control over your child’s spending than if you entrusted him or her with cash.

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