Prepaid credit cards are now coming in to their own (over here in the UK) as people start to understand the benefits of owning one. There’s the safer online shopping angle, you control loaded funds so there’s no risk of your bank account being emptied.

The prepaid credit card companies are also starting to think about how best to service their customers and are adding more and more benefits to their products, an example of this would be a credit builder or even using the card like a bank account by allowing direct debits to be taken from the card, particularly useful for those people who can’t get a bank account.

Prepaid credit cards are here to stay and to be fair the more pressure customers apply to the card program managers the more benefits will become available.

The prepaid credit card industry is still young in the UK so I can see there will be many more benefits to owning a prepaid credit card in the future.

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

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?

By the way Pinyo, really cool social bookmarking buttons!

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.

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.

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.