If you have a college-age child, chances are you may be considering giving them a credit card. They’re easy enough to get – especially if they’re attached to your own credit, so where’s the harm? After all, we all want our kids to understand the ways of the world and some sort of financial education is important. Still, a credit card may not be the best first choice.
Student credit cards can be recipes for disaster. Consider that most teenagers haven’t had to balance a check book or work with a budget, let alone manage monthly spending with a credit card. They don’t yet understand the real impact of buying something on credit and the ramifications of interest rates, minimum payments, and hidden fees.
Add to that the fact that credit card purchasing is a little contradictory. We’ve preached to our kids the value of saving up for things but credit cards allow you to do just the opposite – spend money you not only haven’t saved but money you haven’t even earned yet. It’s a very strong temptation to a financial newbie.
Prepaid debit cards are much better choices for college-age kids. These cards force you to save up your money first and buy later because you have to first deposit money into your prepaid account before you can use the card. That prevents anyone from really overspending and driving themselves into debt. And this is a terrific lesson for any teenager or young adult.
Prepaid cards can be used anywhere a credit card can be used. They can be used at ATMs, online, or at your local store. Their balances and transactions can be tracked just like credit cards too, which is a great feature for parents who want to insure their child is making wise spending choices.
So be careful with student credit cards. They’re really meant for people with more advanced financial experience than teenagers. Start your child off with a prepaid debit card.
- Prepaid Debit Cards for Income Tax Refunds (2008taxes.org)
- Credit Cards – Are They Good for You? (debt-consolidation-2u.com)