Discover Introduces Prepaid Credit Card for Teens With Parental Controls
Should teens have credit cards? That’s always have been a hotly debated topic. I think they should, but many will disagree with me. I guess the best answer will depend on the teen and his or her upbringing. In any case, Discover Card recently introduced a prepaid credit card that could put this debate to rest once an for all.
Current by Discover – Teen Prepaid Debit Card
The Current Teen Prepaid Debit Card is marketed as the “Debit Card for Teens with Built-In Parental Controls”. Some of the key features that could make this the perfect credit card for teens include:
- Parents can set Daily, Weekly, and Monthly spending limits
- Parents can restrict Teen Card use in unwanted shopping categories (e.g. Liquor Stores, Tobacco Stores, Hotels, etc.)
- Free direct deposit for Parents and Teens
- Free email and text message activity alerts
- Teens can access tools and tutorials that help them learn to spend smarter
- Teens can directly deposit their own paychecks
- No minimum balances, loading fees or credit check
Sounds good doesn’t it? This definitely is better than a regular credit card where parents have no control whatsoever once it gets into their child’s hands. Additional, it could be more practical than sending your kid away with a lot of cash. Certainly, this card does make it easier for parents to give their child a credit card.
Current Teen Prepaid Debit Card Is Not The Magic Bullet
Despite all the great features, the Current Teen Prepaid Debit Card is NOT the magic bullet. My primary concern about teach your child how to use a credit card responsibly with a prepaid credit card is that it’s missing two key ingredients:
- Artificial limit only tells the child to stop spending because he or she can’t spend anymore. However, this doesn’t mean that the child will be able to control spending on his or her own once graduated to a real credit card
- Prepaid means no bill to keep up with and no late fee. However, this doesn’t teach the child real life discipline about paying bills on time.
Personally, I really like the idea of this credit card and think that Discover Card is heading in the right direction. However, it’s important, especially for parents, to remember that these extra controls cannot substitute teaching your child about financial responsibility and how to use credit cards wisely.
What is your opinion about teens and credit cards, especially in light of this new prepaid card by Discover?
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I’m now of the school that believes that a revolving credit card is a terrible idea. Responsible credit card use is an oxymoron with a revolving credit, and only possible with a traditional charge card (the kind you are required to pay completely off at the end of the month when the bill comes). Of course, hardly anyone has those kind of cards anymore. In July, I will become credit-card debt free for the first time in about 20 years. TWENTY YEARS of owing money to credit card companies. 5 years of “irresponsible” use and 15 years of “responsible” use, where I always paid more than the minimum, but kept a balance going.
A debit card is a much more sensible option. The kids will have plenty of experience paying off their cell phone bills on time, no need for a credit card to teach them how to become a high-functioning credit junkie. The smartest thing they will ever do is swear off credit cards forever — don’t perpetuate the myth they are necessary to modern life.
@L. Hernandez – That’s a strong conviction and I fully respect it. Let’s just say that credit cards are like power tools — definitely not the right fit for everyone.
On the subject of prepaid credit card versus debt card. I would argue that prepaid card is more sensible because with debit card (1) your child has access to the entire balance in the checking account, and (2) debit card usage could trigger overdraft fee (e.g., when you write a check against overdrawn account) — however, these problems are eliminated with prepaid credit cards.
Hi. I would like to say that I think this is a good idea. I myself use a pre-paid credit card. It is somewhat similar to a debit card in that you can only spend what-ever amount is loaded on that card. But this type of pre-paid credit card outweighs any argument against it in using a normal debit card. Especially with the features on it that it has. I think they have done a good thing here for parents who want to control what there kids spend. However the other side of the coin is that the only people who are going to make money from this is the card issuers themself. Maybe this will be a step in the right direction though for helping kids when it comes to owning a real credit card.
Pinyo, I’m a RSS subscribers, and really do like your writing. I just have a very strong reaction about the credit card industry and the way they market their products.
You are right that letting a teen access the “household” bank account is not a good idea. The debit card should constitute a separate account, and the opening of the new account can be a good learning experience for the teen. Regarding the overdraft fee, as painful as it is, I think it might be a better lesson for a teen. It is a short-term shock that stings. The prepaid card will avoid the overdraft fee, but should the teen go on to a revolving credit card, the slow burn of interest building on an outstanding balance might take longer to sink in.
Again, it’s really the idea that the prepaid card will inevitably lead to a revolving credit card (which is somehow –the– sign of being a “real” adult) that I object to, not the prepaid card itself.
I have mixed feelings about this card. On the one hand, I wonder if we want to put any type of credit card in the hands of our children. But on the other, it comes with some really cool features, like controlling the amount our kids spend or how they spend it. It will be interesting to see if the card gains acceptance.
By the way Pinyo, really cool social bookmarking buttons!
@L. Hernandez – Thank you for being a subscriber.
I really like your solution of creating separate checking account for your child’s debit card and even let them deal with the overdraft fee.
As far as prepaid credit card, eventually lead to a revolving credit card, I agree with that. However, the same can also be said for a debti card.
@DR – There will always be mixed feelings about credit cards. For instance, I know someone who I would want to go near a credit card. In the end, we can only do so much as parents and we will have to let our children deal with it eventually. The important thing is how can we prepare them better?
Thanks for sharing. It is useful for everybody.
This is the first time I have heard of the current card, but I agree that it doesn’t really provide a value to managing money for children in the way they market it. If anything I think a prepaid credit card help teens build their credit so that when they need a real credit card, they can qualify. Nowadays, it’s hard to get a credit card because you have to have credit; but isn’t that the reason you are trying to get a credit card in the first place? kinda ironic if you ask me.
I know when I first tried to get a credit card it took me like a dozen rejected applications until I was finally able to score a low limit card from a retailer, I think Macy’s (which screwed with my bill by the way).
One thing though I do like about giving prepaid cards to teens is that they can help as a way to teach young adults about money management. We all know that when they get older they will probably get a credit card eventually, by putting money on the card and letting it be spent till it’s gone will help them learn that even though a plastic card may not be as tangible as having cash, it still runs out of funds (the same as running out of cash), this way they wont be as charge happy when they get a real credit card with REAL credit