For Teens, the Prepaid Credit Card
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However, Levine continues: “Parents who are already teaching their older kids about money management can use prepaid debit cards to offer the kids some controlled experience in managing their money and making independent decisions.”
It’s important to remember that prepaid debit cards, like any bankcards, are not free. When shopping for one, look closely at monthly or annual charges, application charges, and loading fees to figure out exactly what your costs will be.
Perhaps in the end though, it’s the convenience and freedom from anxiety that these cards offer over cash that makes them so appealing to parents and teenagers alike. The cards tend to offer zero fraud liability, so if it they are ever lost or stolen, the holder is protected.
Says Mary Most, “My kids both commute from Brooklyn to schools in Manhattan via subway, so I’m happy — and so are they — that they’re not carrying cash. They love the freedom, and I love the accountability.”
KIRSTEN DENKER is a writer and a mother of two who lives in Park Slope.
Tips on Teens and Credit
Almost two-thirds of college undergraduates get their first credit card by the age of 19, and in 2003 it was reported that 45 percent of college students were in credit card debt — by an average of $3,066. The National Foundation for Credit Counseling (NFCC) advises that teens should use prepaid or debit cards wherever possible, but that if they are going to use credit cards they should follow these tips.
• Shop around for the best card, taking into account five things: APR, annual fee, length of grace period, penalty fees, and the method of calculating the balance.
• Set up a budget and keep track of spending, just as if they were using their checking account.
• Never max out a credit card; if possible, use it just for emergencies.
• Be aware of the risk of credit fraud, i.e., be careful about giving out their number, and never lend their card to anyone.
• Explain how important it is to establish and maintain good credit. (Anyone can order a credit report online at www.annualcreditreport.com or by calling 1-877 322 8228).
For further help or to talk to an NFCC-certified credit counselor, call 1-800-388 2227.