TheKardashian Kard is history, and good riddance. The reloadable prepaid debit card, aimed at teenage fans of the Kardashian Klan, was launched with great hype in November and immediately came under fire for its over-the-top fees — $99.95 for 12 months. The K-Kard was an extreme example, but high fees have always been a hallmark of prepaid cards marketed to teens. That’s one reason I’ve never liked them, but it’s not the only reason. I contend that the real purpose is to get plastic into the hands of kids who are too young for credit cards. And the main lesson that kids learn is that when the money runs out, Mom and Dad can top up the card. I’m not even persuaded by the argument that prepaid cards let parents keep tabs on how and where their children spend money. If you’re worried your children will spend money on Internet porn or something else that’s objectionable, they shouldn’t have a card in the first place.
Rather than signing up your child for a prepaid card, I’d like to lay out a four-step path to mastering plastic:
» Step 1: Start with cash. For kids of all ages, there’s no better way to learn the true cost of any item than by paying cash. And cash is a great budgeting tool: Once you’ve spent the money, it’s gone. If you run out of cash in a store, you might actually have to put something back.
» Step 2:
Get an ATM card. If your teens have learned to manage cash but are still too young for a checking account with a real debit card, you can arrange for them to carry an ATM card. They won’t be able to make store purchases, but they can access a savings account that includes gift money or earnings from a job.
» Step 3:
Open a checking account with a real debit card. This is appropriate for older teens and college students, and the account should be funded with their own money, not yours. Debit cards aren’t perfect, but the disadvantages pale in comparison to the risks of giving kids a credit card too soon.
» Step 4: Apply for a credit card. Young people under the age of 21 can’t get a credit card unless it’s co-signed by someone 21 or older, usually a parent. I’d recommend that you not sign at least until your child has proved that he’s mature enough to manage and balance a checking account.
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