• Pros and Cons •
College is a great time for teens to learn how to manage their
money responsibly, if they haven’t started already. Chances are
most of their spending will come through the use of a little plastic
card. But how do you know which is the best option for your teen?
Check out the pros and cons of the different types of “plastic” to
determine which is the right fit.
Debit Card
• Uses money from a checking or
savings account
• Easy to set up
• Most accounts are free
Joint Credit Card Authorized User
• uilds credit history for both parent
B
Credit CARD
and teen
Watch Out:
• Easy to set up
• Teen can piggyback on parents’
credit history
• Can set limit on teen’s card
• Risk of overdrafting account and
incurring fees
• Does not build credit history
• If stolen, there is more risk
Secured Card
Watch Out:
Prepaid Card
Watch Out:
Watch Out:
• Spending is limited
• Online monitoring
• Authorized adults can load funds
• Employers can load wages
• Major branded cards can be used
many places
• No credit check
• Parent and teen responsible for debt
• redit limit set by savings account
C
balance
• Builds credit history
• May have high APR
• May have monthly insurance fees
• Parent solely responsible for debt
• Parents’ credit score at risk
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Watch Out:
• Fees are charged for activation,
loading money,
monthly maintenance, etc.
• Does not build credit history
Sarah and Jay Thomason, parents of two
college students and a 13-year-old
“We decided against giving our college-aged kids a credit
card—we thought it might be dangerous! Instead, they each use
a checking account with a debit card that is set up to where it
cannot be overdrawn. We make deposits in their account
monthly. My daughter keeps tabs on her account by using an
app on her phone. We like the convenience of debit cards so they
aren’t running around with cash that could get lost or stolen.
Our 13-year-old gets a weekly allowance on a pre-paid debit card
instead of cash so he can learn how to start managing his money.
30
Before they go off to school, we have our kids listen to Dave
Ramsey’s Financial Peace University and discuss money
management with them.”
Good to Know: Check with your financial institution
about setting up a checking account that does not allow overdrafts to avoid fees. However, beware that charges through the
Internet, such as in-app purchases may not be covered by this
overdraft protection.
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