On the heels of the most recent Great Recession, more and more people are experiencing a newfound dedication to becoming financially literate and more careful about how they spend their money. Gone are the days of frivolous spending as many families have had to tighten their belts and give up those extravagances we all took for granted.
All of this newfound conservation is not going unnoticed by our young Americans. They are seeing how mom and dad have had to pinch pennies and they realize they need to become more careful with their money.
Added to all of this financial turmoil was the passage of the CARD act, which barred teens from getting an unsecured credit card. This left parents wondering how they were going to give their child some financial independence. Hence, the exploding popularity of prepaid and preloaded cards and the variety of products now available from all sorts of credit card companies to fill this surging market.
Pros of Getting Your Teen a Prepaid Card
The biggest advantage of getting a prepaid card for your teen is being able to teach your child how to manage their money. Having them use this type of card will show them how to use plastic responsibly without the horrors of having them rack up a huge credit card balance. Think of a prepaid card as “training wheels” for credit cards.
Another positive is the ability to give your teenager financial independence. You, or your child, can load the card with money and then they will be able to use it anywhere, just like a credit card, but without the fear of your child getting into debt. They can only use the amount deposited into the account, so it teaches your child to budget their money.
Cons of Getting a Prepaid Card for Your Teenager
There are a few red flags you need to watch out for when you are selecting a prepaid card for your kid. One of the biggest things to watch out for are the fees – prepaid cards are loaded with fees because that is how the bank profits from these types of products. Since there is no interest rate on balances, the banks have to make their money somehow. But fear not, there are some prepaid and preloaded cards that won’t kill you in the fee department.
Another disadvantage to using a prepaid card is that it does not help build a credit history. Although they may have a credit card company logo on them, they are NOT credit cards. You are using your own money instead of borrowing it and paying it back.
Best Prepaid Cards on the Market Today
According to a recent blog post by a well-known credit card review company, here are the best prepaid cards for your teen.
- Kaiku Visa Prepaid Card – This newcomer to the prepaid card market claims to have the lowest fees in the industry. The monthly maintenance fee is $3/month and there are no ATM fees if you use one of their 55,000 in-network Allpoint machines. There are no fees for bill payment, activation, replacement, inactivity, or foreign transactions. It features a Funds-ometer to keep track of your spending as well as mobile check loading.
- Card.com Vis Prepaid Card – This card has no overdraft fees, no late fees, no minimum balance, $0 sign up fees, and no credit check. The fees you have to pay attention to include a $5.95/month fee (which is waived if you load at least $800 in the prior 30 days via direct deposit), a $3 ATM or an over-the-counter withdrawal fee, and a $1 balance inquiry.
- Mango Money – The Mango Money prepaid card allows you to save money, and it offers an APY of up to 6 percent. There is a monthly fee of $5 but it is waived if you load at least $500 each month. There are ATM fees but they aren’t out of the ordinary. No sign-up fees, bank transfers, or customer service fees.
- Green Dot Card – The Green Dot Card has long been known as a leader amongst prepaid cards. You can avoid the $4.95 activation fee by purchasing the Green Dot card online, and there are no ATM charges. The monthly $5.95 can be waived if you load at least $1,000 to the card each month.
- American Express Serve – The Serve has many features, including no fees for activation, cash reloads, and using ATMs in its network. The monthly fee is just $1, which is waived if you use direct deposit or add $500 during each statement period. It’s also easy to load money via 27,500 CVS/pharmacy, Family Dollar, Walmart, and participating 7-Eleven locations.