I was recently quoted by Sheryl Nance-Nash of DailyFinance, an AOL Money & Finance Site about the value of prepaid cards for teens. Her article explores the pros and cons of prepaid cards and overall I think Sheryl does a great job.
I see far more negatives than positives when it comes to prepaid cards for teens. The main plus that you get as a parent is a hard limit on spending. However I see several minuses, including:
- Expenses of the cards. Prepaid cards often come with many expenses, such as charges to open the account, add funds, and even calls to customer service to find out your balance.
- Not like spending cash. When you spend with a debit (or credit) card all you need to do is swipe and sign your name. Little to no thought about the spending and amount occurs. When you spend cash, seeing those green dollars leave your wallet makes a much deeper impact.
- No benefit to their credit scores. I believe that managing credit and the ability to borrow will be critical over the coming decade. Prepaid cards don’t do anything to help a teen or college student establish a credit history. A better solution may be a prepaid card, or a card with a small credit limit that has their parents on as cosigners
What do you think? Are any of you prepaid card users?