What You Said About Debit Cards for Kids
Wow! Did I receive responses to the column in which I listed my reservations about debit cards for teens. Many of you disagreed, and I'm happy to share your thoughtful contributions (with a few comments of my own).
First, let me clarify. The debit cards I wrote about are also called prepaid or reloadable cards that make it easy for parents to transfer money automatically.
The problem is, kids depend on parents to refill the card when it's empty. I can't tell you how many times I've heard from a kid who wants to know "the name of the card that my parents can top up when it runs out."
I agree that reloadable cards can come in handy sometimes. Jeff, a reader from Michigan, says he got one for his daughter when she went on a trip to Hawaii with her high-school band. "She could take a minimal amount of cash plus the debit card, and we could add money online as needed," says Jeff. If you have doubts about whether your college student can manage a semester's worth of money, such a card can also be an alternative.
Still, I prefer that teens get a standard debit or check card that's attached to their own checking account and funded with their own money.
For instance, Suzanne Sikkelee writes that her community bank, Citizens State Bank in New Baltimore, Mich., has a teen money-management program that includes saving and checking accounts with a debit card. "We stress the need for parent involvement to teach teens how to use plastic responsibly before they go off to college," says Sikkelee.
That squares with my own belief that teens need to learn how to manage and balance a real checking account with their own money before they leave home (see The Last Word on Kids and Cash).
Sikkelee's bank waives overdraft fees for teens who come into a branch for counseling on how to manage their account. Not every bank is so generous. Brian, a reader from Connecticut, points out that kids can be socked with hefty fees if they overdraw their accounts.
But avoiding overdrafts is one of the money skills kids need to learn. And there are ways to protect them -- by arranging for the bank to reject transactions when an account has insufficient funds, or by linking a checking account to a savings account or line of credit, each of which is cheaper than paying overdraft fees.
The key, as Jeff points out, is that kids need to be "reasonably mature and responsible." Every child is different, but in my experience that means learning how to manage cash first -- through a traditional allowance -- and then moving on to a checking account with a debit card. Once young people have mastered that, you can be reasonably confident they can handle a credit card. But that's another column.