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Article Directory :: Finance & Investment Articles
Parents are often uncomfortable with the idea of their kids having their own credit cards. But if you have a child who's about to enter college, this is the perfect time for them to learn about how to handle credit and debt repayment responsibly. More importantly, this is their chance to build their personal credit history so they can be prepared for the financial challenges they will face in the coming years.
In this article, let's talk about prepaid debit cards and how these cards can be the perfect tools for building early credit history and for teaching kids about proper credit management.
Prepaid Cards - How They Work
Prepaid debit cards are another form of cashless payment. These cards can be used for buying items in stores, supermarket, diners, and other establishments. Prepaid cards can be used to shop online as well. What makes it different from a traditional credit card?
As a prepaid cardholder, you will not be given a credit line. This means, you need to deposit cash into your account before you can start paying with your debit card. When you run out of funds, you will not be able to charge expenses to your card. You must submit a new deposit before you can shop with your debit card. Debit cards are a convenient way to send money or allowance to your teenagers. If your child is staying in a boarding school, you can send their monthly budget through your debit account. Once the money has been transferred, your teenager can withdraw cash from the nearest ATM. Both Visa (Visa Buxx) and MasterCard (Allowcard ) have issued their own versions of prepaid debit cards for teenagers. What's great about prepaid debit cards is that you don't have to worry about interest rates, overdraft fees or late penalty charges.
Teach Your Teens About Credit Management
How can you help your teenager learn about responsible credit management using a prepaid college debit card? Here are some tips:
Limit their credit usage. You can control the amount of money they are allowed to spend in a month by depositing a limited value in your teen's debit account. Explain to your kid that you will not be sending extra money until the next month so they must wisely utilize their monthly budget.
Let them earn it. Teach your kids about the value of money by making them earn it. For instance, if your teen wants to purchase a new outfit or gadget that is not part of the budget, you may agree to pay only half of the purchase amount and let him/her pay the other half of the price.
Keep track of their spending. You can monitor your teen's spending habits by logging in to the debit account. If you notice signs of overspending, calmly speak with your teenager about it.
Involve your teens. Get your teenager involved from choosing the right prepaid debit card, to reading the fine print, to opening the account. Review the Terms and Conditions together and make sure that your child understands the privileges and limitations being a prepaid debit card owner.
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