Start With a Student Debit Card

Posted on March 2, 2009
Filed Under Prepaid Credit Cards

First things first – a student debit card is not much different than any stored-value, prepaid debit card. It has the same online bill-paying and reloading features. It has the same ATM access. And it can be used anywhere a normal Visa or MasterCard is accepted. The only real difference is, if the student is under 18 years old the card requires a co-signer.

So a student debit card is nothing more than a regular prepaid Visa card or a MasterCard debit card; it just comes with a little more oversight.

But what makes a student debit card a great first card? Let’s look at it from two sides – the student’s perspective and the parents’ perspective.

The Student Perspective – Freedom

Students get the freedom that all credit card and debit card holders experience. They can spend money safely in person, on the phone, or on the Internet. And they can do it with little danger of overspending or incurring severe penalty fees.

They can track their spending and control their budget too. This is great practice for the kind of financial control they’ll need to use when they’re out on their own.

Also, in some cases, they can begin to build a credit history. That’s because some debit cards (just a few) will report regular payments to the credit card bureaus. Good credit history can come in handy down the road when they want to make their first big purchase (e.g. a car or a house). And it can also mean a lower credit card APR on your first credit card.

The Parent Perspective – Peace of Mind

Parents feel secure knowing their child has the ability to make necessary purchases without carrying around a lot of cash. Cash can get lost or stolen pretty easily. And when that happens, it’s difficult to replace.

Reloading prepaid cards is pretty easy. Parents can easily resupply their child’s card with a direct deposit, a phone call, or an Internet transaction. Plus, the money is available almost instantly – an important feature in an emergency.

Lastly, parents have the ability to monitor their child’s spending. This has the double effect of not only raising a parent’s comfort level, but also controlling (somewhat) their child’s spending. After all, students aren’t likely to spend their cash on outlandish items if they know mom and dad will see the purchase on the Internet the next day.

A Real World Example

A few years ago (before you could easily buy a debit card online and long before bank prepaid debit cards were available), my oldest daughter had her heart set on a school trip to Europe. One of the many concerns my wife and I had for the trip was how we could insure our daughter would handle her money wisely. We both had prepaid debit cards but we’d never really considered one for her and had never really looked into how to get a debit card for a minor.

After a little bit of investigation we found that our prepaid card company offered “companion” cards for children (i.e. a prepaid debit card under 18, if you will). So we purchased one online. A week or so later it arrived in the mail and we loaded it up. This was a couple of months before the trip so we had time to “school” our daughter in the ways of the prepaid world.

We taught her how to monitor her own balance and keep track of what she purchased online. We also changed her allowance from a weekly one to a monthly one so she got a more realistic taste of how spending works for adults. And she loved it. She immediately took to the freedom the card gave her and the grown up privilege she was now enjoying.

When it came time for the trip weeks later, my daughter’s prepaid card was an old friend. She was extremely comfortable with it and could use it like a pro. Before she left, we simply loaded the card up with more cash and she was ready to go. Of course she also had a certain amount of regular cash and some traveler’s checks as well – didn’t want to put all of the eggs in one basket after all.

As it turned out, getting that debit card for a teenager was a real smart idea because two days into the trip my daughter lost most of her cash (don’t ask). When she called and told us what had happened, we were of course on the edge of angry but we weren’t overly concerned because of the prepaid card. I was able to reload the card online within the hour and my daughter was able to withdraw cash from an ATM in her hotel lobby soon thereafter. It was absolutely the best decision we’d made when preparing for her trip.

Now, as my daughter prepares for college, she still uses her debit card as a sort of electronic wallet to manage her allowance and her part-time job earnings. She understands very well that she can’t spend what she doesn’t have and she makes smarter financial decisions because of that simple fact.

So, in the end, a student debit card is a wise first “plastic” choice from both the student and parent point of view. The card has all the benefits of normal debit cards and more control. It’s a great financial learning tool for any youngster because it helps them learn to manage what they have while preventing them from spending what they don’t have. Student debit cards are win-win propositions for everyone.

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