Prepaid Credit Cards For Teens

Introduction

Prepaid credit cards for teens have been increasing in popularity for a couple of years now, due to the many perceived benefits that they offer teenagers and parents alike. Prepaid credit cards can be used just like a credit card but only to the extent that they have been pre-loaded with cash.

It is impossible for a teenager to get into debt using a prepaid credit card and this is probably the biggest advantage of these types of cards. However this is not the whole story. As well as other advantages there are also disadvantages. This article details with all the issues in full so that you can make a fully informed choice as to whether these types of credit cards are for you.

The advantages of prepaid credit cards:

1) Teaches good money sense - as mentioned in the introduction because you cannot get into debt with this type of credit card it forces your teenager to budget and spend their money wisely. This is especially the case when the parent is in control of loading the card with more cash!

2) Stands them in good stead for real life - prepare your teenager for the future by giving them a prepaid credit card and let them practice for real life before letting them loose on their own as an adult "with the real thing".

3) On-line reporting - most prepaid credit cards provide website access to real-time reporting of transactions on the account. If you are a parent this can offer you real peace of mind, especially if your son of daughter is abroad for a prolonged period of time.

4) Generally available to all - most prepaid cards are available to all teenagers with few exceptions and you don't need to have an established credit history in order to apply.

5) If you should lose your card then it can normally be blocked from use once it has been reported to the relevant department. The limit of your liability only extends to the amount cash you have left prepaid on the card.

The disadvantages of prepaid credit cards:

1) Fees - there is a cost associated with owning a prepaid credit card. (Because the credit card company are not charging you interest they have to make a profit somehow!) When deciding which is the best card for you, look out for the following costs; application fees, monthly service charges, cash loading fees, cash withdrawal fees and account termination fees.

2) Encouragement of reckless spending - the critics argue that these cards tend to encourage teenagers to engage in "cashless spending" without due regard for what they can actually afford. This is of particular concern when parents regularly top-up cards without questioning what the money is being used for.

Conclusion

Prepaid credit cards for teens are an ideal solution for teaching your teenager how to manage their money before they go off to college for example. In my view the advantages far outweigh the disadvantages, particularly when the cards are used with a common sense approach.

It's eminently sensible to choose a prepaid card with low card service fees (application fees, pre-load fees and withdrawal fees etc.). Make sure you make good use of the many personal financial websites on the Internet to compare all of your options before committing to one credit card company in particular.

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