Debit Vs. Prepaid Cards for Kids: How to Choose

  • Prepaid and debit cards give a child or teenager easy access to cash on hand.
  • The type you select will depend on your child’s age and what you are trying to accomplish by providing a card.
  • Before choosing, consider convenience, expense control, account protection, and fees.

Cards that enable cashless transactions are both convenient and educational for children and teens. Whether it’s a traditional debit card attached to a checking account or a prepaid card that parents can load to spend, they can give children a sense of financial freedom and parents and children with the conveniences needed to spend and buy in a modern world. Both types of cards have advantages, risks and limitations.

Debit Cards vs Prepaid Cards for Kids: At a Glance

  • Debit cards for children and teenagers can be acquired via a current account or, if they are old enough, an account in their name.
  • Prepaid cards for kids and teens are often designed to allow parents to easily monitor and manage transactions.

A debit card is a tool for accessing money from a linked checking account. A prepaid card is a tool for accessing a sum of money preloaded on the card. Either can be presented for payment the same way a credit card is at point of sale for purchases. But instead of buying on credit, the transaction depletes the money that is either in the associated current account or on the prepaid card.

“No option is inherently better than the other,” said Rod Griffin, senior director of consumer education and advocacy at Experian. “It really depends on the age of the child and the goal of the parent.”

How do children’s debit cards work?

Debit cards allow the cardholder to make purchases in stores or online and to withdraw cash from ATMs. Each transaction spends money held in a current account with the issuing bank or credit union. Although a PIN can be used to authorize transactions, many debit cards can also be used as point-of-sale credit cards. Whether the transaction is charged in credit or debit, the money spent will be withdrawn from the associated account.

Older teens who have started working can enjoy the convenience of having their paychecks deposited directly into a checking account in their name, as well as the independence of having access to their money via a debit card. You’ll want to look for an account that has low balance requirements, low to no fees, and earns interest. Also ask if you can turn off overdraft protection, as overdraft fees and NSF charges can add up quickly.

Example of children’s debit cards

Wells Fargo requires minors to be at least 13 years old before they can be the primary account holder. A parent must still be on the account, but as long as the account is in the child’s name, the $5 monthly service fee is waived until age 25. Other banks offer products that allow younger account holders. Chase First Banking is for ages 6-17, while CapitalOne Money Teen is available for ages 8-18.

Accounts should provide convenient access for both parent and child. Look for online banking services that allow balance inquiries, transfers, and deposits, as well as user-friendly mobile apps. Text alerts and parental controls, like the ability to set spending limits, are also helpful.

How do children’s prepaid cards work?

Children’s prepaid cards work differently than traditional debit cards. They are detached from a current account and are usually funded by a parent’s main account, from which money is loaded, or transferred, to each child who holds the card. There are no overdraft fees as children cannot spend what is not there.

Popular prepaid cards have mobile apps that cater to parents and kids. On the apps, parents can transfer money to the account, send money to their children, set spending limits, and block specific merchants if needed. Kids can check balances, manage to-do lists, and move money between saving, spending, and investing.

Prepaid cards are useful for young children and for children who may not yet be ready for a debit card and checking account. They offer a way to send money instantly and monitor spending in real time, and it can be a handy option for managing allowances.

These cards usually have monthly fees, which can add up if you have more than one child on the account. Look for cards that offer family plans and be sure to ask about hidden costs. The Federal Deposit Insurance Corporation (FDIC) Community Outreach Team says parents should ask if there are fees to add or transfer money, inactivity or low balance fees, or fees for overdrafts and insufficient funds.

GoHenry and Greenlight market themselves as debit cards and companion apps for children and teens. Both offer a mobile environment, accessible customer service, security features, and financial education tools. Greenlight’s most affordable plan costs just under $5 per month per family and allows parents to create accounts for up to five children. GoHenry costs $3.99 per month per card. Both are FDIC insured.

Once a parent has deposited money into their account, they can use the app to transfer money to their child’s account and choose where they are allowed to spend it. Alerts arrive in real time for purchases made and purchases declined, allowing parents to quickly get money for their children if needed.

What is the ideal age for children to get a debit or prepaid card?

Many traditional debit cards and

check accounts

are best suited for middle school and high school youth – young people who are more mature and can also earn their own money. It also gives them the chance to experience the sting of overdraft fees, which Laura Levine, President and CEO of Jump$tart Coalition, can be a powerful lesson.

“If it’s not a chronic problem, it’s actually good preparation for a kid who’s ready to do it because that’s what adult life will be like,” Levine says. “If your child is less experienced and prone to racking up charges, a prepaid card really helps contain that.”

A good option for younger or less mature children who are still learning about money and spending, cards often come with flexible parental controls and real-time notifications.

“Parents can load their child’s allowance onto the card and use it as an opportunity to teach budgeting skills, for example, showing a child how to track the money they have, how to make it last and what happens when there’s no more money available,” says Griffin.

Whether you choose to go with a checking account and debit card from a bank or credit union, or a prepaid card, the key is to select the product that best suits your family’s needs. You may decide that the monthly fee is a worthwhile expense in exchange for extra parental controls and no overdraft fees. Or you may think that a checking account with a debit card is the best way to manage your child’s money and to familiarize them with a financial institution and the real consequences of inattentive spending.

What to remember from children’s cards

When choosing a card, consider your child’s financial skills and maturity, as well as your needs and wants as a parent. “It’s not so much whether it’s a debit card or a prepaid card, but what else comes with the program,” Levine says.

Before opening an account, review the fine print. Make sure you fully understand all fees. If you go with a bank or credit union, ask if you can turn off overdraft protection. Transactions can be declined because the account doesn’t have enough money, but the alternative is to rack up a bunch of overdraft fees if the institution charges them.

Also ask if the account and cards are insured, either by the FDIC or the NCUA. Finally, look for a user-friendly mobile app that makes transferring and monitoring money easier for you and your child, and offers protections such as card activation and deactivation and PIN reset.

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