Ask an Expert: Should I Get My Teenager a Prepaid Card?

Prepaid cards are a way to train your teen to use plastic responsibly without the risks of credit cards. Just get one with the lowest possible fees.

Ask an Expert: Should I Get My Teenager a Prepaid Card? Photo (cc) by Andres Rueda

This article comes from Jason Bushey at partner site Creditnet.com.

Prepaid cards have soared in popularity over the last few years. While their reputation is mixed and the range in quality wide, there’s no better way to teach your teenager to spend responsibly than with a prepaid card.

Since plastic is increasingly the preferred way to spend, it’s important to help your kids develop good habits with cards. Think of a prepaid card as a “training card” for your kids, allowing you to teach useful habits without the risk that comes with the ability to spend more than you have.

Prepaid debit cards are just that – prepaid. This eliminates the danger of falling into debt while working through the growing pains of using plastic responsibly. While there’s no way to incur interest charges with prepaid, however, it’s important to research the fees attached before signing up.

Some prepaid cards carry monthly or annual fees, and have limits on how much you can transfer to the card free. All prepaid cards are NOT created equal, and you’ll want to avoid the most fee-heavy cards when signing up your teenager.

In my opinion, one of the best prepaid cards available on the market today is Serve from American Express. This card has no monthly or annual fees, and includes member perks reserved for American Express cardholders, including Roadside Assistance and their Global Assist program in case of emergencies. Make sure your son or daughter is aware of the service number on the back of the card, as many consumers – young and old – aren’t familiar with the membership perks attached to their cards.

One of the best things about Serve accounts is how easy it is to upload funds. You can email, text, or even send money via Facebook. This is a tech-savvy card that’s as close to “free” to carry as any prepaid option available today, and works as a useful alternative to checking accounts.

But low-fee isn’t no-fee. While the Serve has no monthly or annual fee and allows the first ATM withdrawal free monthly, subsequent ATM withdrawals are $2. There can also be fees for loading the card from a credit card. (Loading with cash, a debit card, or bank transfer is free.)

Get your kids thinking about responsible credit card swiping early with a prepaid debit card. You won’t need to worry about them running up a balance, and they’ll develop practical spending habits without the risk of running into debt.

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