The Gift of Prepaid Credit Cards
Tuesday, June 9th, 2009 Subscribe To Our Feed
Prepaid credit cards can be a great way for parents to ensure that their children have a monthly allowance, without worrying about them losing cash or a check. College is very expensive and a student loan only goes so far. You do not want them racking up credit card debts, but you do want them to learn how to use their money wisely. A prepaid credit card can be the answer to everyone’s questions.
It is very hard letting your child go into the world and not worrying about them having enough money for food or living expenses. Unsecured credit cards may be a great way to build up a credit score, but are a very quick way to rack up student credit card debt, which could lead to their credit score crashing. Prepaid credit cards are a way for you to give them money and teach them how to use it responsibly. When the money is gone, they cannot charge or buy anything more until more money is loaded onto the card.
So why use a prepaid credit card instead of bank credit cards? The first reason is that a bank credit card can exceed the balance in the checking account if it is linked to the account. This can cause over limit fees to rapidly accumulate. A bank credit card, if it is not tied to the checking account, is reliant upon credit scores. If your child has not established a credit rating, then he or she can be turned down. Each time a lender runs a credit card application, the credit score can be harmed and lowered. This perpetuates the cycle of applying and then the subsequent denial, based on the credit scores.
Prepaid credit cards are great gifts to give your child. He or she can learn how to manage their money wisely and you can control how much money they have to spend each month. There won’t be interest rates tacked onto the purchases and once the money is gone, you can upload more money without worrying about increasing the spending limit beyond what they are responsible enough to handle.
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