When it comes to teens and money, many parents struggle with the process of teaching their children about how to responsibly use credit and debit cards. On the one hand, becoming comfortable with paying with plastic is an essential financial skill in our modern world. But on the other hand, many parents are concerned that turning their teens loose with a traditional credit or debit card will result in overdraft charges, debt, or other negative outcomes due their kids’ inexperience with these powerful financial tools.
To cope with this problem, parents are increasingly turning to the prepaid debit card industry. On the surface, prepaid debit cards seem like the perfect solution to the issue of teaching kids about using a card to pay for their purchases without exposing them to potential financial pitfalls: prepaid cards have the same “look” and “feel” as a debit or credit card issued by a bank, but they don’t provide the same opportunity to get swallowed by debt or send a checking account into the red.
However, many prepaid debit cards are costly because they carry so many fees. In fact, some carry fees so exorbitant that parents dismiss them entirely, choosing to just roll the dice on turning over a conventional credit or debit card to their teen.
It’s important to note that prepaid debit cards vary wildly when it comes to the fees they charge, so it’s important to consider all the cards on the market before choosing to go in another direction. Check out the information below for details about the best and worst prepaid debit cards for teens that are out there today:
Best Prepaid Card: Bluebird from American Express
American Express introduced its Bluebird prepaid debit card in collaboration with Walmart in 2012, and since that time it has received consistently good reviews. The primary reasons for the positive feedback on this card stem from the low fees carried by the card and the transparency American Express has shown in explaining its fee structure to consumers. In fact, the Bluebird card is fee-free in many areas that other prepaid cards aren’t. For example:
- You can avoid surcharges at MoneyPass ATMs; many cards don’t have an ATM network, so you’re subject to an owner’s fee of $2 or more every time you withdraw money or check your balance.
- There’s no monthly fee; comparable cards charge between $3 and $8 per month
- There’s no fee to load cash onto the card at Walmart; most prepaid cards require you to pay $3-5 for a cash load pack.
In short, the Amex Bluebird card provides a number of great services for a fraction of the cost of other prepaid cards out there today. If you’re more comfortable with your teen learning about plastic with a prepaid card, this is probably the one to pick.
Worst Prepaid Card: SpendSmart Justin Bieber Card
In late 2012 Justin Bieber announced a partnership with BillMyParents to offer a prepaid debit card specifically marketed to teens. The card was immediately viewed with suspicion – after all, celebrity-endorsed banking products have a dubious history – and the skepticism was warranted.
Bieber’s card is one of the more confusing cards on the market; the fees are easily understood and many can be avoided, but there’s a lot to remember and keep track of in order to do so, and we all know that organization is not most teens’ strong suit. Also, compared to the Bluebird, the number of fees charged by the Bieber card are borderline outrageous:
- There are fees to load money onto the card ($.75 to load from a bank account, $2.95 to load from a credit or debit card)
- There are fees to withdraw money from an ATM ($1.50) and to do an ATM balance inquiry ($.50)
- There’s a $7.95 replacement card fee
- There’s a $3 fee for 90 days of inactivity
- There’s a $3.95 monthly fee
Of course, as long as the card is used consistently and is never lost or stolen, two of those fees are easily avoided. But teens are notorious for losing and forgetting things, so it’s clear that the Bieber card is seeking to exploit these two weaknesses in its customer base. In short, if you’re shopping for a prepaid card for your teen, pass on the Biebs this time.
The bottom line: prepaid cards are often a good choice when it comes to teaching teens about paying with plastic, but be sure to do your research and shop around for just the right card in order to avoid getting slammed with unnecessary fees.