Prepaid Credit Cards for Teenagers

Prepaid Credit Cards for TeenagersTeens and money: how do we go about teaching them to spend it wisely?

Well, believe it or not, there are times when one finds some helpful suggestions from television commercials and it just so happens that I saw a product advertised that gave me an idea about how to teach this important concept. It revolved around a prepaid credit card for teenagers, and even though I realize that the aim of the issuer is to find another way to increase its bottom line, I could see several advantages for both teens and parents.

These advantages appealed to me personally since, just last week, our daughter was talking about an incident that happened to her and her son (our grandson) that reflects the struggles that young teens face when it comes to budgeting their finances. In this incident, our daughter had given her son (age 13) $30 in cash to buy his lunches at school. A normal price for a lunch meal is $2.50 per meal and, in theory, the money should have lasted him between seven to 10 school days. However, after four days, the boy had depleted all of his cash and come back to Mom asking for more money.

What’s interesting about this situation is that it mirrors what many young teens face as they attempt to comprehend the concept of money and how to budget it. At this age, while many teens have been given an allowance, they are not expected to stay within its limits and, once it is exhausted, they simply go to Mom or Dad and state their wants or needs. So, now that they are nearing adulthood, how do we teach them to control their cash so that it covers their needs? Does the parent have to budget it for them by monitoring their spending habits by only doling out a portion of their allowance at a time? If the parent does that, how will they ever learn what happens if they don’t hold back those funds needed for future purchases?

It is unfortunate, but we, as parents or grandparents, find it very hard to see our children want for anything, and I know that many of you who are reading this article have already experienced this situation with your own children. So how does one instill upon a teen the value of money? First, remember that, unless a teen is earning their own cash, what seems natural to us may seem extremely foreign to them. In fact, understanding the value of a dollar may seem like a foreign subject since they are accustomed to simply asking and receiving without thought of how hard the parent works to earn that dollar.

I say all of this to explain what I believe are the advantages of a prepaid credit card for teenagers.

  • Unlike a traditional credit card, there is no positive or negative effect on either the parent or teen’s credit score.
  • If there is money in the account, the teen can spend it.
  • Once the money is gone, it is gone.
  • Every time a transaction is made, the parent receives a text message indicating the amount of the purchase and what is being bought.
  • In emergencies, parents are free to add additional funds to the account.
  • Monetary gifts for birthdays, school achievements, or other special events can be added to the teen’s account.
  • If the card is lost, the parent can report the lost credit card, which will then be voided and a new card issued.
  • In addition, if the parent sees that the teen is spending the money unwisely, they are free to lock the credit card to prohibit purchases.

I see all of these as advantageous means of allowing a teen the ability to control their finances while giving the parent the right to monitor their spending. I do know, however, that there is no one single solution for every teenager and their families, but I also think that this prepaid credit card could be a solution for some families.

So, you decide that you think that this solution would be right for your teenager, but which company should you use? There are a number of companies that handle the prepaid credit cards for teens, but you will have to select which one is right for your family. If you need help finding those companies, you can simply do a Google search and read what the different companies have to offer and at what rate of interest. To make it even easier to begin your search, I have placed a link below to Bill My Parents. This is not meant as a personal recommendation of the site since I have never used the service, but more of a place for parents to see what is being offered and how this type of prepaid service functions.

If you have tried using a prepaid credit card for your teen, please share with us your experience.

Comments welcome.

Source: The Succulent Wife
Source: Bill My Parents

CC licensed Flickr photo above shared by 401(K) 2012

Article Written by

I have been writing for Lockergnome for eight years.

  • Dallin Crump

    I know it depends on each family, but I don’t think I’d use such a service. It’s certainly important for parents to know what is going on in the lives of their children and know what they’re doing, but I also think it’s especially important for teens to have a small sense of independence and know that their parents trust them. If my parents had used something like this with me, I would probably have resented it.

    My son is only 5 years now, but the approach I’m going to take with respect to finances is that, if he wants money he has to earn it, and he can do whatever he wants with the money he earns. Hopefully, through his own trial and error and our guidance, he will learn to be responsible with his money.

  • John Chvatal

    I really like the philosophy of Dave Ramsey. Dave teaches that a certain percentage goes to giving, to long term saving, and to spending otherwise kids are, within reason, allowed to make mistakes.
    I may sound harsh but if your daughter would hold firm in x amount of money for x amount of school lunches your grandson would learn really quickly not to spend the money on other things. Let kids make mistakes and let them suffer the consequences. It is the only way for them to learn.
    As for the prepaid credit card it costs money and it, in my view, doesn’t encourage trust between parent and child.

  • Sharon Wiatt Jones

    Fast forward to your child’s senior year in college. I was doing a critique of a student’s resume and he kept saying, “I have to have a job when I graduate.” Just as I thought that he was unusually motivated, I discovered the young man’s incentive.
    “My father showed me my auto insurance bill before I came back to college. He said, ‘Son, the next one is yours as soon as you graduate.’ I have to get a job–I have bills to pay!”
    Contrast this with the majority of students who report that they don’t even begin their job search until graduating and returning home to their old bedroom. They miss interviewing with on-campus recruiters for jobs with higher average salaries and benefits than students tend to obtain off-campus. Also, they forgo interactions with employers (including many alumni) at career fairs and other events.

  • izbm

    As good as it seems giving the resposibilties with credit cards its still not a good as cash. With a credit card the money on it seems almost not there, its just numbers, with cash though, the money is phsyically there, so you actually can learn budget and are more likely to save.
    Also its not good to get people in the habits of credit cards

    • Orest Sulyk

      I agree with you, but if you don’t have credit, it’s tough to get loans from the bank. So I guess the answer would be SAVE UP MONEY:)

  • Twohats

    Isn’t this type of card just called a debit card?

  • Dan Czarnecki

    Or, they should just give them a debit card. With a debit card, you get charged immediately for any purchase, and it comes right out of your checking or savings account. I have only a debit card right now, and I think that I would feel safer paying with a debit card rather than a credit card because I know how to set limits and buy things that cost more than how much I have in my account.

  • Dravack

    I dunno I like the idea behind a prepaid credit card idea but I have to agree with izbm and others I think giving cash is a better idea. easier to see how much you have and what you have spent. Besides those credit cards charge like $4 to reload and a monthly fee if you don’t add X amount or spend X amount.

  • Cosdis

    Well, i can see this work acctually.